The Dana 30 has both high-pinion and low-pinion options. Could be that the replacement axle is high-pinon which could cause the shaft to be too short.
Will help if we know what year vehicle you are working with.

 

 

 

You haven't given us any info on your vehicle at all. 00-01 had lp axles and older had hp.

XJs did not come with CV axles that was a GC thing.

 

 

Well with the lift you have and a lp 30 you might be looking for a different shaft.

I had to get creative with my GC for a rear ds

 

Looking at the control arm angle, it looks like the axle is hanging, and not supporting the vehicle weight.

If you put the weight on it, it should work fine because it will move up and forward, effectively lengthening the shaft.

 

That's a low pinion Dana 30, the 97 Cherokees had the high pinion Dana 30 with u-joints, the Grand Cherokees had the low pinion with CV shafts.

 

 

Don't need to drop it, just raise the axle up until it is starting to lift the frame......I don't think the HP vs LP is your issue, as the LP d/s would be longer.....but you have an LP housing.

 

 

What transfer case do you have ?

Personally, I'd get a new or different one.......