Me, I want as much rear overhang (weight bias) as possible.
I'd cut the front wheel lip.
It'll also give the car better visual proportions, if aesthetics matter.
The front yoke of the driveshaft should have as much support (spline engagement) without bottoming out as you can give it.
That said, I moved the rearend back 1/2" on my Duster street car to fit big tires; made some spacers that I slid between the ft hangers and their chassis brackets.