Therr was a member in here (I think it was DV8customs) that did something similar to what you mentioned. If I remember correctly, he lowered the arch on the front fenders on a bagged/lowered 2w.d. truck. His looked great. I've always wondered how that idea would carry over by "stretching" the wheel opening on a 4x4.
The surplus Military 37"s sell for cheap money. Looking forward to your project.