To me i don't think gen 2 shocks are worth the hassle to put on a Gen 1. I forget the travel increase but i thought it was only 1-2 inches so for that cost/hassle its not worth it to me. Also, 3.0 doesn't mean it's better than 2.5. Yes its bigger but the shaft is the same diameter and i'd be willing to bet the piston/valve is the same diameter so i don't see much benefit there either. People will also say 3.0 will stay cooler but i've seen no evidence or numbers supporting this. Yes, 3.0 diameter has more surface area to act as a heat sink but there's also more fluid to heat up so i think overall temp will be the same, but the 3.0 may take longer to heat up. I'd recommend a tuned set of 2.5 s over 3.0 but thats just my opinion and like everyone else, i have no data to support my claims
You actually do not gain any suspension travel with the Fox 3.0. Hopefully your up-down travel limitations are determined by your spring setup and bump stop position. If you're bottoming or topping out on your shock internals there's something wrong with your setup and you're hammering your shock piston in ways it's not supposed to be hammered.
That being said, the Gen 2 3.0 Fox shock is a little longer than the Gen 1, so, if you don't have correct bump stops to stop upward travel, you could more easily bottom that Gen 2 Fox out on it's internals. Can it happen? I don't know, I've not articulated my whole rear suspension both ways without shocks to measure the leaf spring and bump stop travel limitations and done the math. Math is hard. I'm counting on Ford has already done it for us. If you plan on using a Deaver +3 spring that raises the rear an inch or two (depending on your shackle choice), then the extra 3.0 shock length bolted in the stock gen 1 mounts may be the perfect match.
So a shock's job is to slow the movement of the unsprung suspension mass and convert that enertia into heat, so a bigger 3" diam shock can do a better job, with a larger pistion and more fluid in more extreme situations than a 2.5" body shock. These Fox shocks are Monotube design, which means that the internal piston seals the ID of that 3" diam body as opposed to a 2.5" body, so I'll say with certainty that the shock piston is bigger in the 3.0 vs the 2.5 shock. Bigger is better in this case because the piston can have bigger oil flow holes, and therefore the ability to allow quicker, harder movements, depending on the shim stack configuration. In other words, if you're hammering down a washboard section at high speed, a 2.5" diam piston max velocity is limited by it's smaller holes, and therefore you may feel more of the hard hits than the 3.0.
If you're not working your suspension very hard, that increase in size may never benefit you. These are just my opinions, and I'm biased because I just picked up a set of Gen 2 3.0 shocks and my plan is to use Eibach Gen 1 650# springs in front for a little extra lift, and Deaver +3 (SD or HD, not decided yet) out back. Hoping for about 2" of lift out back?
Because the Gen 1 6.2 V8 is heavier and needs that 650# spring (vs 550# for v6), I'll have to have the rebound damping of the Gen 2 3.0 shock increased and compression damping slightly decreased, to balance suspension movement, I THINK?
The gen 2 3.0 shock being longer in front may pose a problem with overextending the front suspension downward, so I may use an Evil Manufacturing Gen 1 Raptor limiting strap kit welded in too.
Oh, and
@Jhollowell, from what I've heard, the larger 3.0 shock wears far slower than the 2.5, like by nearly twice as long in most situations, and that to me adds more value to the swap. Your mileage may vary....