I purchased a FM 40 series muffler with my 2.5" exhaust through Rusty's Offroad for my 98XJ, and it fit perfectly in place of the original unit.. According to their site, they said the exhaust can be installed on all years of XJ's... so I would think you should be good for replacing your factory unit with one.. I plan on purchasing the same kit for my recently purchased 90XJ.. so I guess I'll soon find out for sure..

As far as California I think that the FM mufflers are CARB legal, but don't quote me on that.. From what I've been able to find online the FM mufflers are CARB legal, and you should be fine so long as your exhaust doesn't exceed 95ish decibels.. which I know mine was under that with a brand new stock replacement cat, and 2.5" piping back from the cat, so you should be good, so long as you still have the cat and everything installed... But hopefully some of our knowledgable CA folks will chime in here shortly to correct me if I'm wrong, before you get stuck with a fine or waste of money...