Your front wheelbearings will like you a LOT more if you just take the spacers out of the front... don't know if you've ever done the wheel bearings on that but there's about 1/8" between the two bearing races in the rotor, not the best setup for that situation...
I'm with Bobby though, Explorer 8.8 is the best way to go, but is some work, I don't regret doing it to mine...
That said the rear axle could take spacers, it'd be happier with them than the D35 is... I think the D35 is about 1-1.5" wider than the stock rear axle, maybe just move the spacers to the back...
Here's a picture of mine after I broke/twisted the rear driveshaft (and bent a leaf spring, pierced the radiator, twisted an axle tube at the plug weld and broke the transfer case output bearing snap ring groove...) doing a tractor pull without a traction bar... but it has a good shadow showing mine with the neutral backspacing wheels (I think, I don't remember, got them used over 10 years ago...) and 35x12.50 tires with a D35 up front and an Explorer 8.8 out back...
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