rear disc from grand cherokee on a 8 3/4

Rick,
The spacer goes between the outside bearing race and the outer seal/bearing retainer. It actually sits inside the Cherokee bracket and dust shield. And because its made out of a stock bearing race the contact area is exactly the same as the stock set up.
Now as far as the axles go, unless you order new axles and have them made 5/16" longer you do lose that much contact within the differential.
Since Im cutting cutting down a B body rear I needed new axles anyway. There was no extra cost ordering the axles with the extra length.
So far with the salvage and new parts I have $400 in the brake setup.
Andrew