Not necessarily - I have the '03 and have done some hairy stuff with it. I followed a group of Jeeps and Discos with lockers and all kinds of shit, my bone stock D2 made it through places where some others got stuck. Provided your ABS/TC works you can get through some tough stuff. Plus I have 4x4 training, which some of the other pilots did not and it showed.
The '04 transfer case has the diff lock, I swapped an '04 tcase into my '03, and the '04 shifter that goes with it, simple enough job. Haven't had the time yet to take it out to play. There is a simple wiring trick to get the dash light working - I used an unused wire in the '03 tcase wiring harness, you just shift the wire from one position in the plug to another.
