As Eddie and others have said, there is nothing wrong with the Dana 30. You can run it with 35" tires all day long as long as you understand what you've got. I wouldn't recommend a 37, but some roll with them and have had good luck.
A Dana 30 is a great axle, we just ask A LOT of it. I would agree that spending a pile of money on a Dana 30 is a waste, but a paycheck spent on a Dana 30 isn't a bad investment as long as it is done in the right places.
Here are our recommendations on for running a Dana 30 based on our experiences (if others have different opinions that's fine):
As mentioned a few times here, don't go lower than a 4.88 gear because the teeth on the pinion get weak and small with less surface contact. A 4.56 gear is probably a better choice in regards to strength if you're going to tackle bigger stuff. If you have a manual and plan on doing Rubicon and bigger trails those low gears become more important, food for thought...
Open diffs or TrueTracs are the way to go. A standard clutch style limited slip in the front will trip up the traction control because they generate drag between the wheels. A TrueTrac is one of the few solid options for a Dana 30 JK. If you're planning on upgrading to a new axle in the future than I might hold off on the TrueTrac, get an ARB for the rear and run it. But, if you're planning on sticking with 35's and don't plan on pretending your JK is a rock bouncer it's money well spent. The best option if money is not a factor is of course a selectable locker, but then we are getting into money spent on an axle that probably isn't really worth it. With a TrueTrac and and the proper driving technique you'll get everywhere you can get on 35s (which really is pretty much everywhere!).
Don't upgrade the axle shafts or U Joints. Use the stock axles as a fuse. A set of Nitros or RCVs will move the fuse to your ring and pinion. Go to a junk yard and pick up a set of crusty trail spares and just pack them with you. Chances are good that you'll break an axle shaft eventually, and that's ok it's all part of the adventure. It's generally a pretty painless trail repair as far as these things go. If you don't break them, your buddies will. Then you can give them out on the trail in exchange for beers and those delightful burritos you buddy's wife made, those sandwiches you packed kinda suck.... Win/win. What did that spare cost you? $25? WORTH IT.
C Gussets are absolutely a worthwhile investment, do it if you plan on keeping your Dana 30.
Opinions of sleeves and trusses are mixed, but one way or another they are not worth it for a Dana 30.
The last, and most important thing about a Dana 30 is the attitude of the driver/owner. First of all: stop worrying about it! Enjoy the Jeep you have! Your Dana 30 isn't "the best," but with a little money spent in the right places it'll keep right up with the big money rigs, so who cares! If that's what your JK has and you don't have or plan on allocating the budget for a new axle, RUN IT!!! I wheeled a mashed up XJ with a Dana 30 with 35" tires for YEARS. I drove it like I stole it, or at least it looked like it. I tried not let it bounce, I didn't floor it in reverse. I killed the 300K mile 4.0 and dropped a big, fat, silly stroker in it. I broke the long side axle twice, and every time I knew that I was being an idiot. I conquered everything in Moab, the Rubicon, Johnson Valley.... all for the low low price of FREE with the Cherokee. I ran it with 4.56 gears and you guessed it: A TrueTrac. It died about 6 years into its life, driving down a fire road when the left front tire caught a rut and literally twisted the axle tube out of housing in a freak accident. We replaced it with a D44, but only because it finally died. I then sold it to another XJ owner for $300. Not a bad deal.
Embrace your Dana 30!