Rear suspension design is very similar between 2nd and 3rd gens, but it's rare to see a 3rd gen with the saggy butt syndrome. Front suspension is great - much better than 2nd gens. Regarding off-road, 2nd gens get 2" of front wheel travel stock, or 4" with the swaybar disconnected. The 3rd gens get 4" stock, or 7" with the swaybar disconnected, or 9-10" with aftermarket upper control arms and coil-overs. So flex off-road is great for IFS, plus the daily ride around town is good. I personally thought the 3rd gen stock shocks in both front and rear were a bit soft.

IMO, I can't think of any cons to getting a 3rd gen instead of a 2nd gen. [Edit: OK, I just thought of one con - it's more involved and more expensive to do a lift to the front suspension due to the coil-overs, but there are still inexpensive options, such as spacers or Bilstein shocks inside other Toyota coils. Using Tundra coils gives some lift without making it too stiff. All the benefits to the 3rd gen far outweigh the cons.]

The 5 speeds ('96-'00) were available with the rear locker, but they aren't very common.