700's have several weak points, but by far and away their biggest is a simple lack of clutch surface area and hydraulic pressure at low RPMs. Few gas engines, and none of the ones ever used in front of a 700, make their peak torque in the 1500-1700 RPM range. A 300HP Cummins is going to make at least 600lb-ft in that RPM range. Even a 200HP 4BT is over 400lb-ft (the ISB170 is rated at 420lb-ft). The rated max input torque for a 4L65E is 380lb-ft, and the 4L65E has upgraded internals over a regular 700 (although said internals can be retrofitted to a 700). The only reason they live behind 6.0 gas engines (which make 380lb-ft at 3000k or so RPMs) is because the peak torque RPM is higher and the computer can pull timing to reduce the torque during shifts.
If trans length is the issue, perhaps using a different trans AND t-case combo is in order? I am helping a friend with his Jeep YJ 6.0 swap right now, and we are using a 4L80E/NP241 combo with a JB conversions super short slip yoke eliminator in the transfer case. In the end, the combo is allowing him to use the same rear driveshaft he used before the swap - previous combo was a 4.3, 4L60E, NP241 with a slip yoke eliminator (not the super short SYE, but the regular one).