OK, here goes.
1) Screwdrivers, hammers, block of wood, bearing packer, towels, torque wrench, seal puller if you're replacing seals, brass punch.
2) I would replace the bearings inside the hub (not the lockout hub, but the large hub over the spindle), and use a quality bearing and seal, like SKF or Timken.
3) Use only quality grease. I prefer Mobil-1 to anything else out there, it costs a little more, but won't break the bank and it's worth it. A bearing packer is invaluable. Get the plastic one (about $7) and not the metal one as the plastic will conform to the bearing better so you'll get a better (more even) pack. Don't overtighten though as I have seen the plastic ones break. I have both and would recommend the plastic one.
4) Yes, clean everything out well and see #5.
5) DO NOT overpack the hubs with grease. This is a common problem people run into when rebuilding hubs. There is no reason the hub must be filled with grease. If water is leaking in, put a little more RTV on it, but don't add more grease. The grease becomes old and cakes up, making the hub harder to turn, and will cause it not to return to the 2WD position as well. Use a light coating of grease, I use a little grease (just a light application), then put some ATF in there and put the hub in place. I have done this for 17 years with no problems on my D44 with over 235,000 miles on it. The ATF won't harden and the hubs will always turn freely and work properly. The ATF is a trick I got from an old mechanic, and is used primarily for cold climates that will render most greases to concrete (also another case for Mobil-1).
If you don't believe me on the grease, this is from M.R. 252, 1984-1986 Jeep Technical Service Manual, under "Front Axle - Lubrication".
When servicing the front drive hubs, apply a light coating of chassis lubricant to the internal components. Do not pack the hubs full of lubricant; apply a light coating only.
6) Yes, there is supposed to be a gasket that goes there, but I have used RTV for many years. Just apply a small bead. If you do decide to use a gasket, rub grease all over the gasket before you apply it. The grease will make the gasket compress uniformly when you install the hub and ensure you can take it off easy, in most cases it can be re-used as well, although it may not seal well after the first time.
7) The best U-joints out there are genuine Spicer, no doubt about it.
If you need any other info, let me know, I have the manual and a scanner.
And yes, it is 2 and 3/32" on the socket, they're about $10 from most stores, or you can often borrow one for free from them as well.
Winter Harbor, Maine
'81 CJ-8 Scrambled, It's a Jeep, Chevy, IHC kinda thing!
'88.5 Zuki, 5" Calmini, Locked, Swamped, Rolled, and just generally broken in right!