Yes it will fit and it will be an improvement. Of course you will have to change out the axles to 31 spline but that is the whole point right. Also I would go ahead and rebuild the diff and change the clutch pack arrangement to the 8 clutch pack arrangement, 4 per side instead of 3.
If I was at home I could put up a link to a great site on replacing and rebuilding differentials but I am at my parents now and don'e have the name available off hand. If you search through some of the threads that I have posted on about differentials and gears it should be linked in there.