You CAN run the 96+ spindles no problem. As a matter of fact I just finished a complete 4 lug-to-5 lug, 4 wheel disc brake conversion. I used front spindle/hub assemblies from a 1997 Mustang GT. The front calipers are the 99-2004 PBR Mustang GT brakes, and rear SN95 calipers. I put on new pads and rotors specified for 99-2004. I also went with the North Race Cars Fox Length rear axles, North Race Cars custom backing plates, and new e-brake cables from North Race Cars. Other than having to bend and double flare the rear brake lines that mount to the 8.8 rear and put in an adapter fitting they went on without a hitch.
I did the conversion on my 1988 Mustang GT that while doing the conversion I also installed the
Eibach Sportline springs which lowered the car 2 inches. Upper and lower tubular
control arms plus a new 8.8 rear end with 3.73 gears.
Tonite was the first time I got to drive since we did this conversion a week ago. The tires DO NOT stick out. The bulge of the sidewall DOES NOT stick out. I see plenty of guys putting on 17x9 Cobra wheels and stretching a 245 on the wheel trying to make it fit and most times seeing this THOSE stick out. I drove the car down twisting back roads over dips above 55, took it down the highway at about 80 - no scrub at all. It is tight and under full lock you may just skim the lip a touch but remember my car is also lowered 2". Most guys go 1-1.25" - you won't rub at all with a 1-1.25" drop even. Stock ride height not any issue. They don't stick out.
I had these same exact wheels and tires on my 1985 Notchback with again 1997 front spindle/hub assemblies with the 1997 smaller calipers. I had C-springs installed (don't like 'em) but the tires sat inside the wheel well where the tire sidewall bulge was just inside the inner lip - perfect in my opinion. Looks nice and tight. No because of the 2" drop I'll see how things go. This car is my daily driver that I put 60 miles a day on. I think once I put the adjustable shocks, struts and Eibach sway bars on the car will tighten up and probably eliminate just about any scrub issue as minimal as it is. If you are real picky about there being absolutely no sign of even the lightest rub - go with the 94-95 spindles if you do a 2" drop. If you do a 1-1.25" drop, don't even worry about it.
The wheels are directly from ford - factory 17x8 bullitt wheels. They are very close to 5.5" backspace, they are a smidge over maybe something like 5.62" B.S. - I will have them off again this weekend to remeasure. As a note, I have over 340 photos of the entire conversion process and i documented everything including part#s for miscellaneous parts such as fittings and brake lines. I covered everything step by step.
Here's a 94-95 spindle/hub compared to a 96+ spindle and hub. You can see the difference. And between these two theres (as mentioned above) about an 8mm difference. The front wheel will be pulled inside the fender about 8mm. If you are running a 9" wide wheel, you HAVE TO run the 94-95s and even then it's very tight.
I will be taking some pics of the car first thing in the AM and I'll take the pics down the side of the car from a low angle close the the front wheel well openings and you can see it and make up your own mind.
John