The differentials, transfercase and gearbox have breather hose with a check valve mechanism. This allows for fluid expansion when things heat up. With time these breather hoses and check valves are a weakness when combined with lengthy water crossings. The case you refer to was a second owner and per his analysis was the logical reason for water in the transfer case oil and subsequent issues. It is known feature and weakness of the design. There are relocation kits routing these breather lines up high into the engine bay. A recommended mod for those considering serious overland and cross water/river use.It shouldn't have water in it unless a seal fails. Same with the ADD. They're nearly identical devices. And nearly the same height. They fail the same way. They're all pretty reliable if they're used occasionally and not wrenched on by monkeys. I don't think the AWD systems are any more reliable than the part time.
The only place there's a big difference is in the tundra and Sequoia that have significantly heavier duty cases than the land cruiser models. But they're also built for heavier use.
Water crossings add pretty normal in my world. Just depends on how you use it and where. An off-road SUV had better TTbe ready for water crossings. That's a pretty basic requirement.
The vast majority of LC owners never once engage 4hi or 4lo for the entire life of the vehicle. Id bet it's less than 1% of LXs are ever shifted. So theyd never know if they failed.
Further info on the breather hose setup and relocation of the same can be found here on MUD or by general search on the internet.
200 Series Drivetrain Breather Project
I haven't seen to many threads here in the 200 section regarding drive train breather extensions, so I figured I might as well document my experiences for reference later. The plan is to extend the front and rear differentials, as well as the transmission and transfer case breathers into the...

Or this video at 30min showing the breather hose location on top of the transfer case.
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