Yup, our do-it-all truck was a 2wd F350 dually when it left the factory, auto too - now she's got the proper D60 up front, limited slip diffs in both axles, and is also a 5-speed with custom-built t-case (allows PTO installation yet has a fixed-yoke rear output, they never came like that). She winches, lifts, pushes snow (well, leaves and dirt mostly), carries a camper, pulls a trailer, yada yada yada...
K, onto the details - first and foremost you will need a D60 axle. You can use any '86-'97 F350 front axle, there are some variations ('86-'91 are kingpins setup, '92-'95 are have ball joints but the same brake caliper setup as the kingpins, '96-'97 have the same ball joints as the previous version but now come with bolt-on calipers and brackets) but they all fit exactly the same way. Ideally you'd want an axle that came out of a dually truck, but if you can't find one or the cost is prohibitive you can use an axle out of a single-wheel truck and either run single-style wheels on it (you'll need to carry two spare wheels then) or add aftermarket bolt-on adapters to make it accept the dually wheels you now have. If you plan on regearing the axles keep that in mind when looking for a front axle, regearing a Dana axle is annoying at best if you do it yourself and expensive if you pay someone to do it, so you're best off finding one that already has the gears you want - for trucks of that vintage you get to choose between 3.55 and 4.10 gear ratios, I'll discuss them a bit later on.
Next up, actually attaching said axle to the frame. This is really fun, you get to play with a torch and a grinder and an air hammer and a big ol hammer
Basically you strip everything down to bare frame rails, and start anew. You can copy the factory setup with front-mounted shackles but that doesn't ride very well at all, and tends to wander going down the road even with all new bushings and steering linkages. The typical way of correcting this is by installing what's known as a "reversed shackle kit" (RSK), it bolts the springs to the frame in the front and puts the shackles behind the axle, the end result is a much nicer ride and somewhat better steering. Either way you do it you'll be needing a bunch of brackets and you'll be drilling a bunch of holes, in case of the RSKs you'll probably be doing some welding too. The way I'd go about it would be as follows:
- for the very front of the frame rails, this whole kit:
http://www.sky-manufacturing.com/cgi-bin/commerce.cgi?preadd=action&key=FORD-FSROB-002
- for the frame behind the front axle, these hangers:
http://www.sky-manufacturing.com/cgi-bin/commerce.cgi?preadd=action&key=FORD-FSSH-001
- for attaching the tracbar to the frame, this bracket in 3" drop:
http://www.pmfsuspension.com/OBS-Track-Bar-Bracket_p_16.html
- for making the steering box work with the D60, this pitman arm:
http://www.pmfsuspension.com/1988-1997-F-250350-Drop-Pitman-Arm_p_19.html
You'll notice the Sky brackets give you 2.5" lift, while the PMF parts are for 3" - what this will do is make your steering draglink and the tracbar more level, the factory geometry isn't exactly ideal in this regard, more level is better.
Obviously you'll need springs. You can get the direct-replacement diesel-spec springs for a '86-'97 4x4 F350, or you can use softer ones for a truck with a small-block gas engine and add air springs on top of them. We're running the softer leaves with the air bellows, it's a great setup for keeping the ride height and thus steering and headlight alignment consistent regardless of load, but you'll obviously need a source of compressed air to fill them up as needed (yes, a small electric compressor for tires will work for this purpose, as long as you don't mess with them very often).
For shocks attachment, you'll need the towers off a 4x4 F250 or 350. Jeff's Bronco Graveyard carries these reasonably priced, I'd suggest that you get the '92-'97 version with the 4 mounting holes instead of the earlier with just two holes. You'll be drilling the frame anyways, might as well distribute the loads better while you're at it.
K, now we got the front suspension out the way, let's move onto the driveline - your 2wd transmission has no way of powering the front axle, you need a transfer case for that and the 2wd trans cannot directly accept that. One exception to this general rule, if you currently have a driveline parking brake hanging off the back of the trans, you can remove that and install a t-case in its place - however this setup is typical for the F-Superduty trucks (10-lug wheels, still 16" tho), you more than likely do not have it. Which leaves you with two options:
#1 remove the 2wd transmission and replace it with a 4x4 specific one, then bolt up a t-case of your choice to that.
#2 keep your 2wd transmission as is, and install a stand-alone (divorced-mount) t-case between it and the rear axle.
With option #1 you can use all factory parts and everything is pretty much a bolt-on affair (except the rear driveshaft that will need shortening), but you do have the possibly high cost of the 4x4 transmission. With option #2 you don't get to spend money on a new transmission, but you will have a harder time finding a proper transfer case (pretty much only one type available, and nowadays it's not all that common even in salvage yards), you'll be fabricating a crossmember for it to hang off, and now you'll need two driveshafts modified instead of just the rear one. So, pick your poison, if you don't like your current transmission then obviously #1 is the better choice.
Rear axle, could be just a matter of dropping a pair of 4" lift blocks between the axle and the springs. Obviously you'll need longer U-bolts for that as well, those would run about $100 or less usually. There are better ways of going about it all, but they are more involved, this is quick and easy and relatively cheap.
This should about cover it. If you start crunching the numbers you'll realize it's not a cheap upgrade, not by a long shot. Most folks would usually suggest that you buy a donor truck with a blown engine, and get all your needed parts from it, the scrap the rest. Your call how you wanna go about it...