Mud is quite tricky with ATRAC. ATRAC does slow you down a bit in mud because the ABS brain will be braking/slowing down your tires on and off in order to transfer the power to the appropriate wheel(s). Therefore, i would definitely get a bit of momentum (if possible) going thru the mudhole. You probably should NOT stop in the middle of mudhole.
As stated above, you MUST lock the center diff if you're going thru mudhole. This will do two good things:
1. Turn off VSC...and yes, this applies to both Hi and Lo range.
2. Prevent transfer of power back and forth between front and rear axles (via Torsen center diff). By locking the Torsen center diff, you are making sure that power goes to both ends equally and all the time. Less variation in power flow = better traction.
I don't know about other people's experiences, but i am almost always in 4-LO while off-roading. 4-Hi is mostly for going thru washboards at high speed. When i had my 4runner (2002), i could swear that ATRAC was more responsive (aggressive) in 4-LO as opposed to 4-HI.
And, remember, above 3000 rpms or so, ATRAC decreases it's intervention, allowing you to make a "rooster tail" or power up an embankment.
So, the keys to ATRAC are: (LOCK CENTER DIFF when off-roading)
1. Keep your speed consistent...don't be chicken to push a little deeper on your gas pedal. ATRAC is not at it's best when you're crawling really really slow. Why? Because ATRAC has to detect wheel slippage (aka difference in wheel speed between two wheels on the same axle) before it can intervene and brake the slipping wheel.
2. For rock crawling, you need ATRAC. Therefore, keep your foot on the gas pedal but try and avoid gunning it. I would stay below 3000 or so rpms.
3. If you're in mud or sand or need to power up a mudhill, then i would be more aggressive with the throttle. As soon as your momentum slows down, i would push harder on the gas pedal and keep my rpms above 3000 (but do NOT redline it!) because in these instances, ATRAC can hinder your forward progress. Remember, ATRAC lags behind actual traction because it has to wait for slippage. And in mud, the wheel(s) with traction changes every second. In addition, by revving it a bit, ATRAC decreases it's intervention and allow you to get power to all 4 wheels (with or without traction).
4. Do not pay attention to all the weird springy-dinky noise coming from underneath your vehicle...that is ATRAC doing it's thing. And try to avoid the urge to lift off the gas pedal when you hear these noises. This will cause loss of momentum and ATRAC does not function very well if your wheels are not spinning.
Go out and try it out. The above statements are from my experience with my '02 4runner.
Have fun.