Welcome Monroe,
The Jeep lettering notations can be confusing at first to a newbie. Regular Cherokees (XJ) were produced from 1984-2001 with few major changes. The years you are looking at are, of course, in this range. The Grand Cherokees from 1999-2004 are the WJ series and this is the range you are investigating. Good, low mileage versions of both the XJ and WJ are out there.
WJ Information:
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XJ Information:
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Information from Edmunds.com
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Click on "More Information" then "Research" I had a 2000 XJ (Cherokee) Sport with the I-6, automatic, and Command Trac. It averaged about 20 mpg with conservative driving. I currently have a 2002 WJ (Grand Cherokee) Laredo with the I-6, automatic, and Select-Trac.
The Grands are more plush and have more options than the standard Cherokees. They are also a little bit longer and weigh about 700 pounds more. The Limiteds are the models with all the options, Hoo-Ha, and bling-bling.
For towing a utility trailer or winter transportation either model will do just fine. The towing capacity for both with the I-6 is 5000 pounds/20 feet. The V-8 will get you a little more towing capacity and only lower your mileage about 1 mpg.
For winter or off-road use you should consider a set of quality All-Terrain tires to replace the Wrangler STs that came from the factory.
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Wrangler STs can be described as 'low bid', they are number 60 of 63.
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Everyone has they preferred tire. Mine are Kumho Venture AT825s. Many of the others here prefer BFG ATs for their off-road reputation but you should read the ratings here and at Consumer Reports and decide which categories are important where you drive. Not all manufacturers are listed though, your local tire retailer may have different brands.
The Command-Trac transmission is a part-time only four wheel drive. I prefer the Select-Trac transmission as it gives me the ability to have and use full-time four wheel drive or part time. Both transmissions were available in the Cherokee and Grand Cherokee as standard or options. The Quadra-Drive and Quadra-Trac transmissions were also available in the Grands as I recall. They are full time AWD which has its own benefits/drawbacks but for your projected use any of the available transmissions will do. (Different combinations were available in different years) If I were to get another one I would again chose the Select-Trac and if one with the limited slip were available that would be my preference.
A lot of it comes down to money, all other things being equal, (and they never are) you will be paying about $3000 more for the WJ over the XJ
There is a lot of accumulated knowledge here and advise/opinions are generally very good. If anyone give you a bad or questionable answer plenty of others will jump in to provide their opinions.
Some of the Jeepers here are a bit cranky at times and a few of us can properly be labeled curmudgeons but we try to be helpful most of the time (when we are not arguing about off-topic (OT) things.
Think about your questions and ask away! (or don't think before you ask, those questions may be better)