There are plenty of flaws with every Land Rover vehicle. The P38 got a horrible reputation because of the EAS air suspension and early BECM electrical issues as all electronics went to one central computer. Pretty smart actually, but poorly executed in the early vehicles. You had to take the vehicle to LR dealership and the repair costs were through the roof. The later models had many fewer issues and if you take the EAS out of the question, it is quite reliable, if you can say that about any rover. With the information on the forums, every issue has been addressed and can be fixed is your own garage. For example, the EAS valve block could cost you $1500 at a dealer or rebuilt in your garage for $30.
As far as capability, did you take the LR3/4 offroad on any challenging trails or just drive it in the parking lot? The onroad manners are exceptional and it performs well offroad in stock form, but my P38 keeps up and even made it up trails where 2 LR3s had to turn around due to clearance issues. I can only talk from experience, not what you might 'think' it can do. All the LR3s also threw at least one fault on washboards or other higher speed areas that required them to stop and restart the vehicle. I love the LR3/4 and plan to get an LR4 for my wife that will be slowly modified. The locking rear diff is an incredible upgrade, but very hard to find in the used market. Its only like $800 as a factory option and basically can't be swapped over for anything less than a couple grand due to the integration of the electronics. To swap it over requires the whole diff, wiring and computer integration, not an easy task and there are no third party locking diffs available. A P38 lifted on springs with Detroit True-tracs in the diffs is a serious offroad rig with articulation that you cannot achieve with any LR3.
