Ok, you should spend some time here:
http://www.nicoclub.com
all of your questions have been asked, and most have been answered well somewhere in the threads...
The spacers in the photo are 2", but you could get away with 1"-1.5" and cause less strain on the studs and ball joints.Also, if you run spacers, they will widen the stance of the truck, and will not tuck inside of the fenders, if you're concerned with that...The benefit of running spacers is that you do not have to bore the wheels to make them fit!A pair of spacers can be found on ebay for about $60.So, you can save the amount of the machine shop, and keep a lot of steering angle, but widen the truck, or, pay to bore the wheels (or DIY) and keep the wheels under the fenders, just with less steering angle.
Choices.
As for tires- you can find pairs of used tires on Craigslist for cheap sometimes... just know what to look for as far as age and tire wear when you examine them. Tire shops usually keep good pairs of used tires around.... it's worth asking.