I'd extend the rear of the frame a bit, then put the sprocket in its final location, run the live axle through that between the bearings, then I'd use 1" ujoints on either trailing arms or a-arms (single or double. Single will work well, but you don't get as much travel. Double works better, however it's more complex). What's your current engine and are you planning on putting a larger engine on in the future?