Let me chime in here a bit, as I'm one of the few on this forum who have actually done this mod on this generation of vehicle.
First of all, YES, you will a slight MPG increase. I see anywhere from .5-1mpg. Others with this generation (I think there are only 3 of us) who have performed this mod on this forum have experienced the same thing.
Also to (potentially) correct a previous post, the car is not in "2wd" full time. It's on 70/30 mode. Meaning 70% to the back, 30% to the front. When it detects slip, it engages to a full 50/50 4wd mode. The cutting of the gray wire w/orange stripe does change it to true 2wd. Note - that's what I've been told. I have NOT verified this myself by jacking all 4 wheels off the ground to test the scenario. I can say however, that performing the mod has resulted in an average of .5 increase in mpg.
Regarding your AWD mysteriously kicking in. This can happen if your front (or rear) tires are worn significantly more than the others - or if your'e running 2 different brand of tires. The rotation speeds will be differ (even though the tire might be the same 'spec' 235/60/18 (or whatever,) the actual tire diameter may differ (if ever so slightly) across various brands or even models) and thus, the car will think it's slipping, and lock the front diff. That actually is what lead to me performing this mod. I replaced only 2 of the 4 tires, and whenever my wife would drive the car (her vehicle) around a corner - such as getting onto a freeway (the onramp) the traction light would shine and the car would lock into 4wd. Basically diameter of the rear tires was a bit smaller than those of the front - so - it thought it was slipping.
One thing I haven't noticed - the others who have performed this mod claim that strange shift-clunk (usually when turning at very very low speed) these AWD v8's sometimes exhibits will go away. This mod didn't seem to affect it one way or another for me, sadly.
As far as doing donuts - good luck. The explorer is a heavy suv - it's partly what gives it such an impressive tow rating for its class. Turning those rear tires on dry pavement, even with our larger v8's is quite a tall order.