Here is another response I had typed up to an earlier post:
Searching is very helpful, there is a lot of stuff covered here already...but here is a quick noobs guide to modifying the xterra
1) Remove the step rails from the truck. They are VERY thin and if ever hit on a rock or tree stump etc off road, they crumple into the bottoms of your doors. Plus, even without a lift, the truck LOOKS higher to the eye with less stuff hanging down off of it.
2) Remove the mud flaps hanging down if you have them. Couple screws and maybe a razor blade to get them off. Same concept...they look better without them, and with less stuff hanging DOWN close to the ground, the truck LOOKS higher!
3) Avoid Brush Guards/bull bars or any kind of front bumper bar that bolts on. The problem is the way they mount. They have to go below the frame horns, which reduces your ground clearance and your appraoach angle. ALso, if you ever rear end someone or run into something, they will immediately crumble and fold over on top of your hood, head lights, grill, etc. They WILL cause more damage and provide no real protection.
4) Avoid any engine chips that advertise crazy horsepower gains. They are a scam. There is no real way to get A LOT of power out of these engines.
5) Do go for the stock air box mod. You can easily modify your stock airbox so that it works about like a cold air intake. Plus it still has the air box which protects the air filter from dirt and water.
6) Remove your rear sway bar (FREE!). The link to the How To is in my signature below.
7) PML is a cheap and effective (~1.5") suspension lift for ~$70. Link to the How To is in my signature.
8) If you are mechanically inclined and not afraid of a bigger task, you can get a 2" body lift for ~$70 if you are resourceful.
9) If your plastic bumpers and grills are dull and gray, you can paint them with a few rattle cans of spray paint or spray on bed liner. Looks great.
Essentially, for under $200 and a bit of labor and desire to learn, you can have a 3.5" lift, a better intake and a bad ass looking truck.
On the stock 1.5 generation Xterra, you can fit 32" tires with minor trimming of the plastic around the front wheels.
With a 2" body lift and some minor trimming, you can fit 33" tires.
Note: Any Suspension Lift does not allow for bigger tires. The extra room disappears once the suspension flexes on a bump.
Also, decide what it is you want your truck to do. Don't just do a mod because you were told to. Kinda think about what you want to do in your X that you can't do yet, and figure out what you need to do to get there