The VG motor may have been around a while and proven its reliabitly, but it is a dinosaur. The VQ motor has been around for a while also, starting with the VQ35 in the Maxima. It was one of the top 10 engines for a long time, over the years it has been tweaked and refined. The VQ motor that resides in Frontiers/Xterras/Pathfinders all come from that branch, actually its pretty much a stroked 350Z motor. While I do wish it had more low end torque (its a rev happy motor), it's nothing one of the programmers can't accomplish these days.
That's another thing, aftermarket support just seems to get bigger and bigger. Something we couldn't say about the Gen Is. Gen IIs are the most mod friendly set of trucks (except for the Titan) Nissan has produced, in regards to available items that is. Armor, programmers, exhausts, intakes, suspension parts, the whole nine. And a lot of it from big name companies, so no real having to wait for items.
As for the drivetrain, well it is weak. Not inferior, just weak for a vehicle with as much power and weight as these have. Nissan did drop the ball there, but if you're careful you can go strong and without worry.
That being said though, a lot of people are startings to do Titan swaps. Gen II trucks are built on the same frame as the Titan, just narrowed. People have come to discover the M205 front axle out of a Titan bolts right in, and as long as your rear is geared right...you're good to go. You will need either Gen II V8 Pathfinder half shafts or you can do an entire Titan suspension swap out front. This will actually give you a stronger axle and a mid-travel suspension set up. You can even splurge and make it a long-travel set up.
Nothing against the Gen Is, I loved mine and wish I still had it as a second vehicle at times, but my Gen II blows it out of the water.