I believe that many of these SAS'ed rigs are daily drivers. And I have read in several people's registries that they actually ride smmother once the bugs are worked out.
To get a 3rd gen to perform as well it would take twice as much work, as you have two complete axle swaps to do rather than just one
I am sure that a 3rd gen is very capable for mild and possibly moderate offroading. It cannot do anything overly serious though as the wheel travel is extremely limited. Another factor is it's width (at least on our narrow washington trails.)
2nd Gens do a little better as they retain the solid rear axle. The rear at least can take on an obstacle, however due the limited travel in the IFS they become extremely unstable. I can't count the number of times I have found my front tire a couple feet up in the air. And I don't do hardcore trails.
1st gens are much more capable as the TTB front end has a lot more travel than the IFS as well as retaining a solid rear. Not to mention that the TTB can be heavily modified for more capability.
In the end none can compare offroad to a rig with a solid front and rear.
As to the original point of this thread, the biggest limiting factor with the 3rd gen is the rear axle shafts running through the frame. Not to mention the weak link the CV's create. There will likely never be a long travel suspension kit developed for it. Heck there is only one available for the 2nd gens and they have been around for a decade with less engineering obstacles to overcome.
