I'm looking at Gen III's as well. I've found a huge difference in price on the XLS vs the Limited. If you can live with cloth seats and less wood the XLS often represents a $3k savings on that year range. Not sure if you give up anything mechanically by going with the XLS though.
Here's what someone wrote about this difference:
"XLS is supplied with a four-speed automatic transmission, part-time 4WD and a two-speed transfer case.
Limited comes with a five-speed automatic with a Sportronic sequential shifter and ActiveTrac electronic full-time AWD coupled with a torque-sensing automatic limited-slip differential. Limited comes standard with the sunroof, leather interior, heated front seats, a power driver's seat, heated mirrors, fog lights, chrome exterior accents, premium audio and the LCD Information Center, which includes the aforesaid compass and readouts for outside temperature, date and time."
That Tiptronic shifter is really nice. Also, when on some pretty technical trails in Moab, that limited slip rear end really impressed me. I never once wished I had a locker back there.