I have had just about every Montero that came to North America, currently have a gen 2.5. Have had 3 gen 3's. There is pros and cons to both, but the 2.5's is for sure a "tougher" rig as far as serious off roading goes and with the locker it is better and crawling along through really nasty stuff. But for 99% of what really goes on (getting to and from where you want to go) the gen 3 is nicer. As far as steering the gen 3's are much tighter in my experience as they have a rack and pinion setup (like any and every sports car) as opposed to old school recirculating ball. The IRS is great for faster fire road travel, and with my OME HD setup I could jump my gen 3 paris dakar style and the landing was no joke trophy truck plush. The space in the third row rear seat well is awesome for storage as well. The gen 2.5 is still pretty limited articulation wise even with a solid rear axle, but the gen 3 is probably worse in a cross axle situation, but put the gen 3 on a lift and you will see an amazing amount of vertical wheel travel, especially in droop. Basically the gen 2.5 is more of a slow speed off road bruiser and the gen 3 is a high speed Paris Dakar rally bred race truck. One thing I really did not like about my gen 3's was the jumpy throttle off idle, especially bad in low range, my gen 3's were all 2003's with the 3.8L so the mapping may be different on the 2001-2002 gen 3's with the 3.5L. I worry less about my 2.5 in off road situations, but if I could only have one vehicle I would probably go with a gen 3.