I've done the 8.8 swap on my 85 XJ, I used the original proportioning valve, just removed a o-ring from it, since then people seem to say leave the o-ring alone and it works fine. Not sure what the wisdom on this is now, I did my swap in 2004.
If your trying to keep some of the original MJ features (load sensing, leveling?) I'd leave the original proportioning valve as it is. But I'm no expert on it.
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Yes, my goal is to maintain as much MJ features as possible...
What O-ring do you speak of?