My gut says the same thing about the electric transfer case, but my real experience with my Xterras says for me the electric is better:
* Shift on the fly up to 55
* Auto mode- which is great in patchy ice/ snow, which is the only way we seem to get it here. Any time in these conditions I wanted to switch from 2h to 4h, I couldn't because I was going over 25.
Off road, I think a lever and manual hubs reigns supreme, but for combined use, I'm willing to go w/ the electric. It has been on the Pathy and Armada for a while now, and I have yet to hear a complaint.
Overall, I'm pretty pleased with the '05. It's only a fraction longer, and the overhangs are shorter, so approach/ departure should improve.
I just hope we get the locker option, and a clutch start cancel for the manuals.
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2012 4x4 S- work in progress....