You can really do this on a budget with the 3" lift I linked if you run 33" tires. On the gearing, the general consensus is 33's and 3.73's are perfection. If you have 3.42's you're not far off enough to justify re-gearing - it will not drive poorly.
I had one K5 that I lifted 2.5" and went with 33's and never got around to re-gearing. It had the stock 3.08 gears and it ran around fine, I drove it 8 years like that. You have to keep in mind that chasing perfection on a lifted truck can get very expensive. With the gearing you have, you can go 3" over 33's or 4" over 35's and not re-gear and still love the truck. KISS.