The Engines
The US-market WJ had
3 available engines, the 4.0L Powertech inline 6, the 4.7L Powertech V8, and the 4.7L High Output v8. Export models (the "WG") had additional options of the 3.1L TurboDiesel inline-5 and the 2.7L CRD turbodiesel inline-5.
4.0L "Powertech" I6
The I6 is a classic design with a few modern touches added to keep it "fresh". It is a solid chunk of iron....iron block AND iron head. With an all-iron construction, it is not as sensitive to temperature as an aluminum/iron motor and can survive a few overheatings. I personally ran my old 4.0 with the upper coolant hose unhooked for 25 miles with no ill effects! (although I wouldn't recommend it). Its design is similar to the I6s dating back to the AMC days and was shared in many Jeep platforms. It's nearly identical to the motors in the XJ, MJ, TJ, LJ, and ZJ, so many Jeepers prefer this motor because it is something they are already familiar with.
Specs
The 4.0L I-6 produces
195hp @ 4600rpm, 230 ft-lbs @ 3000rpm. The 4.0L runs fine with regular grade fuels, 87 octane is recommended. EPA estimates for fuel economy are 15 city/21 hwy (2WD) and 15 city/20 highway (4WD). Towing capacity for the 4.0L models is rated at 5000 lbs (when equipped with the towing package).
Unfortunately, even the base model WJs are right around 4000lbs curb weight and 195hp/230 ft-lbs is not all that much power/torque. While it is more than enough to safety get into traffic, commute, and generally use the vehicle, you may find it lacking in power for towing or carrying heavy loads/lots of passengers. Off road, the low-range gear reduction negates the lower power output to some extent. If you plan to add larger tires (reducing effective power), then you might find the 4.0 sluggish. Some feel it doesn't have enough power to really spin the wheels like you would need in deep mud.
Drivetrain
Daimler/Chrysler paired the I6 up with the 42RE transmission and Dana 35 axle....neither of which has a stellar reputation for being durable. Even when properly serviced, many 42RE transmissions fail in the 120-150k range. They are...ok, but not great.
Oil
As an owner, one of the best things you can do for your 4.0L engine is to run the proper weight and quality of oil. While the 4.0 is not a highly-stressed motor that quickly breaks down oils, it
is older technology that current oils are not well-suited to. Due to EPA regulations, zinc-containing additives (ZDDP) have been phased out of most motor oils. Excessive cam/lifter/piston wear can occur if you just run standard passenger car motor oil. Heavy-Duty motor oils such as Rotella T5 will greatly prolong the life of the engine and are not very expensive either.
The 4.0L has only two vulnerabilities - piston cracking and head cracking. 99-2000 4.0s apparently suffered from a poor casting run on pistons and the skirts can break off, destroying the engine. In addition, the 0331 casting head (2000-2001) is prone to cracking and mixing oil and coolant. Check the oil cap for milky goo, this can indicate a cracked head or head gasket problem.
Advantages: Durable - survives neglect. Common - easy to replace. Easy/cheap to work on. Torquey - decent low end torque off-road.
Disadvantages: Noisy - old technology, sounds like a tractor motor. Inefficient - yields a massive 48hp/liter and a best 19mpg. Transmission/Axles: unreliable. Need to regear if you go with larger tires.
4.7L "Powertech" V8
The v8s are
something completely new that Chrysler released in 1999. They were on Ward's 10 Best Engines of the Year when they were released. They used a over-head cam design with aluminum heads, a generational leap over the previous v8s which were straight out of the 60s (with fuel injection added as an afterthought). The v8 motors tend to produce equal or better fuel economy AND more power than the I6. As for the reliability concerns - there are many well into the 200k zone. The V8s are less forgiving of neglect and do require specific coolant to prevent corrosion of the aluminum components. In addition, if overheated, the head gaskets WILL blow and the heads will probably warp. This is due to the difference in expansion between aluminum and iron and is typical of ANY engine of iron/aluminum design.
Other somewhat uncommon issues: if overheated, the valve seats can drop from the head since they are made from steel and the aluminum head expands far enough for them to drop out. The front cover near the water pump can become eroded from corrosion, but this is usually caused by using the wrong coolant (HOAT only!). It also may have been caused by a faulty casting run on the front covers. For most people, if this part were going to fail, it would have failed and been replaced already. There is a rumor that sludge is an issue with the 4.7L v8, but that is a rumor carried over from the discontinued 5.2L in the Dodge Dakota and ZJ Grand Cherokee. Failure to change the PCV valve every 60,000 miles also contributes. Sludge is always possible, but with proper maintenance should not be an issue.
The V8s bring an extra 40hp and 70 ft-lbs of torque to the plate without being much heavier than their I6 counterparts. Most of the weight difference isn't in the engine though, and the engine itself may be lighter than the I6. The added weight is elsewhere: transmission and axles.
Drivetrain
The V8 got the much-stronger 45RFE (and later, 545RFE) transmission which is still used today in the 390hp Hemi Ram. These rarely ever fail. In addition, they added a Dana 44a rear end which is not perfect, but is much stronger than the Dana 35 in the I6 models.
Specs
The standard 4.7L v8 makes
235hp @ 4800rpm and 295 ft-lbs of torque @ 3200rpm. The 4.7L Powertech runs fine on regular grade fuel, 87 octane is recommended. EPA estimates for fuel economy on 2WD and 4WD 4.7 models is 14 city/ 19 highway. The 4.7L models are rated at 6500lbs towing capacity.
Off road where torque is the king, both motors are fine. On-road is where the v8 shines. How often do you need to do 0-60 off-road? Most of the wheeling I do has an average speed of about 6mph and a top of 22 (per my GPS). But where the I6 will get you to 45mph quickly, the v8 has no problems getting up and going into freeway traffic, towing a heavy load, or climbing the pass fully loaded.
Advantages: Power/Torque, mileage, stronger transmission/axles, towing capacity, won't have as great a need to regear due to higher torque, alternator/power steering pump located up high away from the ground/mud/water.
Disadvantages: not as forgiving of neglect, a little harder/more expensive to work on, not as common if you need to replace it.
4.7L High Output
The 4.7L High Output was introduced in 2002 as standard equipment on Overland models, special order on Limited models. It was not available on Laredo models, but some of the 2004 Rocky Mountain and Freedom edition models had the 4.7HO as a special order option.
The V8 High Output adds a ton of upgraded hard parts to the standard v8, bumps the compression ratio up to 9.7:1, adds a forged crank, and makes an extra 30hp/30ft-lbs of torque. The nice thing is that it makes the extra torque EVERYWHERE in the power band, not just up high. You'll be able to feel a difference right off of idle.
In addition to the forged crank, the pistons, rods, bearings, heads, valves, intake manifold, fuel injectors, airbox, air plenum, intake tube, and spark plugs were also changed. The ECU was also modified and the engine is equipped with 2 knock sensors to allow peak performance with higher octane fuel.
As for maintenance, the HO is no worse than the standard v8 and only has a few unique maintenance items: spark plugs, air filter, oil. The rest of the different parts are not maintenance items and should never fail in normal usage.
Specs
The 4.7 High Output produces
265hp @ 5200rpm and 325 ft-lbs @ 3600rpm. The 4.7L HO was designed to produce maximum power with premium fuel (91 oct or higher). However, it is designed to safely run on 87 octane fuel with slightly reduced power output. Many owners find that fuel economy is same-or-better with regular grade fuel during normal driving.
Jeep recommends premium fuel for ALL of the gasoline engines during heavy load or towing to reduce the possibility of knocking/engine damage.
3.1 TD
The 3.1 Turbo Diesel was an inline-5 engine co-developed by Detroit Diesel and VM Motori, known as the 531OHV. The architecture was all cast-iron, iron block, iron head with a gear-driven cam. It was produced entirely in Italy for use in the Austrian-built WG export model from 1999-2001. It developed 138hp and 283ft-lbs of torque. This is also paired with the Jeep 44RE transmission similar to what is found in the ZJ models. Alas, my information on this motor is limited, but it seems to suffer common head gasket failures and does not deliver stellar fuel economy, although better than any of the gas offerings (23-29mpg). These engines usually come paired with Quadra-Trac II 4WD, a Dana 30 front axle, and a Dana 44a rear axle. As this was an export-only engine, my personal experience is limited. More info to come...
2.7 CRD
The 2.7 CRD was the replacement for the 3.1TD engine and was released in 2002. It was also an inline 5 engine design but in this case was sourced through Mercedes-Benz (a result of the 1999 merger that formed Daimler-Chrysler). This engine was considerably more modern than the 3.1 it replaced and has an aluminum head, dual overhead cams (as opposed to the overhead valve 3.1TD), and 4 valves per cylinder. The CRD acronym stands for Common Rail Diesel (injection), a modern form of diesel injection similar to what is used in VW TDI offerings from the mid-2000s. Despite its lower displacement, it produced more power, torque, and better economy than the 3.1TD, with 161hp and 295ft-lbs. The same engine was also used in Mercedes-Benz Sprinter vans, a popular commercial vehicle. This motor is paired with the 5-speed Mercedes 5g-Tronic/W5A580 transmission, the Quadra-Trac II 4WD system, a Dana 30 front axle, and a Dana 44a rear axle.
Generally, reviews of the 2.7 CRD Grand Cherokee say it is a "good buy", not surprising given Daimler-Benz's extensive experience and stellar reputation for diesel engines. At this time, information (and personal experience) with this motor is limited.