Firstly many thanks to @saidhi, @nn and @YaserAG for keeping the discussion lively and going. I will get back to some of the points but lets get the SK rant over and out with first
On the frame, I have heard it blamed for everything that can possibly be wrong with the car. I've heard that its too stiff (with no flex) and it does not help in keeping all four wheels on the ground. I've heard that its the completely wrong chassis for rallying....period, no discussions, no explainations required. I've heard that it lacks the "modern" developments and jazz incorporated into frames by developers. I've heard that the metallurgy is not up to date etc etc. There is the obvious reference to the wheelbase being too short, though that is less of an issue. Not being an engineer by any means, over time I looked through all the arguments and with my un-biasedness, the conclusions of my research to date have not favoured any of the above arguments.
@YaserAG's post about the dubai rally raid car makers is a breath of fresh air for me.... Safe to say that to the best of my knowledge (and please correct me if I am wrong), in most forms of auto racing, a stiff frame is a good frame! Once you put a 6 point roll cage on any frame it becomes even stiffer! A stiffer frame apart from theoretically being able to take more abuse, presents a more stable platform to the suspension to be set up and do its work consistenly. I recently got a chance to look at a Vigo frame, which was a complete monstrosity in terms of bulk and size!
Once you get over the stiffness issue, you are left with the two obvious shortcomings wheel base and wheel travel. Both of these require a bit of surgery to fix up but there is tremendous flexibility not just in terms to how you want to do it but also how much! Another thing that can be done generally is move the FJ40 spings slightly outwards to improve lateral stability, which would be a must for wider axles. All of it takes up a bit of effort but not that much cash out here, considering what the imported alternatives of such jazz work will end up costing you particulrly with cheap availability of FJ40 body/frame parts. Nevertheless, the point is that once you let go of the stock set-up and embrace that your going against the wind in a buggy sort of scenario, the FJ40 offers you tremendous flexibility and potential upside that you can affordably incorporate on your race vehicle.
On top of everything, there is also the problem of the frame handling the power you subject it to. I can't think of many stock platforms which would handle 260 rally HPs and 260 sand lbs/ft without blinking and rather ask for more.... All said, its also by far the cheapest alternative with host of good condition army auctions available.
[I]Early FJ40 frame photo above by ourvice at flickr.com