I bought the same 4Runner you are considering in 2010, a 98 with 159k miles. I have had my 4Runner for almost 5 years and 100k miles. It is the most rugged, capable vehicle I have known. You should be able to find one in very nice shape for under $4,000. I bought mine in Dallas and took a flight to pick it up. There are no issues with sludge.
The only money I have spent on engine repairs are to re-seal the timing chain cover. The timing belt in the 3.4 runs dry but requires periodic replacement. The 2/7's timing chain has no replacement interval but may require re-sealing. There is no particular advantage to the 2.7 with that respect.
A 3.4 liter SR5 4x5 and its 2.7 liter 2WD cousin share a bunch of hardware:
- Frame
- Transmission
- Radiator
The SR5 is heavier, because of the larger motor and 4WD components.
I get 19.5 MPG in the winter and 23.5 MPG in the summer. That is pencil and paper, week in and week out. I have gotten 27 for a tank, and 17 when towing. If it runs right, you should expect at least that. I haven't towed 3000 lbs, but I have towed my Polaris ATV a good bit, which I think is 1500 lbs.
I have upgraded the tires and wheels to 16" to have more choices, and to make room for brakes. I run winter tires from November to March, for ski/snowmobile season. It goes everywhere I need to go. I don't like to get stuck, so I drive it reasonably and carry a set of chains.
I added an extra transmission cooler in series with a new radiator. Don't drive around with a 20 year old radiator. See "pink milkshake". Headlights should be upgraded to 2002 spec. It only takes a few minutes, and it's well worth it.
The brakes are upgraded to Tundra brakes, and have lasted 50k miles per set. The Autozone warranty is 3 years, so I am just out time to swap them out. The Tundra brakes work on steep passes, and when they warp it is still driveable. The brakes should be done no matter what 4Runner you buy.
The DOHC engine likes to rev. When climbing hills with the 2.7 downshift early and keep it at 3500 RPM. When towing there is that awkward time at the summit when towing when it wants to go to 2nd gear at 4500 RPM to maintain 55 MPH. That is more noise than I like, I usually just slow down when it shifts to 2nd, and keep 3500 RPM.
With the rugged frame construction you can go places I would be afraid to go in a van. If you need a little more speed to get through just go for it. There are skid plates everywhere.
2WD is more like a station wagon than a off road vehicle. It is lower to the ground, and the tires are smaller. I think it still has a high center of gravity compared to a Subaru. I slow down on snow packed roads, more than I would in a car. Every winter I see too many 4Runners, especially lifted ones, that have been rolled. This could be a false sense of security, from too much capability.
2WD doesn't require as much insurance. You can upgrade the tires, brakes, interior, headlights etc. If you wreck the body, most of the upgrades will survive. You could pull all of your upgrades and attach them to your next 2WD, then sell the hulk. This may be easier than finding another 4WD with all the right stuff (e-locker, etc.).
A couple of upgrades I have considered: an e-locker, or air locker, would be great for pulling trailers out snow packed parking spaces. Especially with chains on. And going to a 4.30 rear axle might be just the tweak the 2.7 needs to get the engine more in the power band at highway speeds.
I haven't driven a 3.4, so I can't talk about how fast or slow they are. On hills around Denver, the 4WD 4Runners pull away from me on hills, but not nearly as fast as a turbo Subaru. So I think we may be in the same ball park. The local guys also know the hills a lot better, so they know when to speed up.
A good compromise may be a V6 2WD. You may save most of the purchase price by not getting 4WD. But you can feel safe knowing that you bought the biggest motor you could.
Given what I have spent and the fun we have had with it, I would buy another one configured the same way. Good luck with what you choose.