Regarding the engine, you have four variants. Five actually. 4D56 Turbo from the Japanese GenI model, 4D56 Turbo from the Japanese early GenII model (there's a difference in the block, thats it), 4D56 Turbo Intercooler from the English GenI model, 4D56 Turbo Intercooler from the Korean assembled Galloper (this also has an EFI variant) and 4D56 non turbo again Korean assembled from Shahzore (not to be confused with the 4D55). Other variants also come in Delica, L200 etc.
The 4D56 engine from Galloper is the smoothest of them all, but i've heard that the quality of it's components is not as good as the japanese ones. I've seen quite a few Pajero's with the Shahzore non turbo 4D56 running great too. I myself have used the Japanese 4D56 Turbo engine and the English variant, both. My father purchased a zero meter 1989 LWB turbo wagon which we are still using, and were using with its original engine, without any repairs made to it, till July this year (is gave us 280,000 kms). I replaced the engine in July and installed a 4D56 Turbo from a Delica 2001 and swapped the inlet with that of a 4D56Ti, and converted it to an intercooler. The old engine was giving me some 10km within the city whereas this one gives me 11km! Regarding the heating problem, I've Alhamdulillah never come across such a situation. I've heard many people complaining about the same, but i've never had this problem. I've even touched 160 km/h on this engine on many occasions, and driven over 120 km/h on the Lahore Islamabad Peshawar motorway. What i think is that Pajero stock engines may not have this problem, but if you get the engine overhauled or the head repaired, you might. Coz according to my experience overhauling a Pajero engine is a waste of money. Regarding the four wheeling capacity, my Pajero makes two to three trips to Chitral every year. My village is some 4 hours from Chitral city and is one of the highest, if not the highest, places there. We go there every year, and my Pajero goes as far as the local jeeps can go, which even most Prado's over there fail to do. Be it mud or snow it climbs as good. Not to forget, the back of our car is stuffed, and by far far exceeds its loading capacity.
That's my experience with my Pajero. Never tried heavy duty offroading though, but i do plan to, if i get a chance.
Hope that helps.
P.S. You'll find a good ride well under 600k .