Click image for more information
There is an interesting difference between how the transfer case mounts on the TJ vs. XJ. The Cherokee uses a 23 degree rotation on the transfer case. On a Wrangler there is a 13 degree rotation. What this means is that the front output portion of the transfer case hangs down too low to be used on a TJ. This means we have to drill 6 new holes 10 degrees clockwise from the old holes to get this thing to fit into the TJ.
You have 3 options here.
Take it to a machine shop for probably $60 or so.
Buy a clocking ring. This will add 1/2" to the driveline length and costs $125-190.
Drill 'Em ourselves!
We chose the third option. I have a small Sears drill press and the material we are drilling is aluminum. Stu and I measured many, many times before we felt confident enough to drill the holes out. Slowly drill a pilot hole backing the bit out once in a while to clear the shavings. If you don't drill slowly and carefully you just might lose your cool. (Don't ask how I know this ;) Once the pilot holes were complete we drilled the larger holes. I can't remember the bit size we used. We then cleaned up the holes. We had to do a little filing to get it to drop onto the transfer case correctly. Below are some pictures of our work.