There are three components inside the transfer case. One is the ring and pinion gear set that allows the power to change direction and head down the drive shaft to the back of the car. The second is the front differential. The third thing in there is the viscous coupler for the center diff (the center diff actually lives back inside the tranny).

The thing that most people break inside the transfer case is the spider gears in the front differential. Dude goes and practices his launches, gets some wheel hop and breaks the spider gears in the front differential. He goes to the dealership and they tell him he needs a new transfer case for $2k+. Thus the thinking that the transfer cases are weak. Some people have had trouble with the ring and pinion gears, but most trouble is with the front differential.

Busted Stock Front Diffs:

Mitsubishi had Getrag of Germany build the transfer case assembly for the EVO. This is normally a good thing since Getrag builds some nice stuff. But also Getrag has this thing about not selling service parts separate. Everyone always cries about this after the fact but how many of you axed about it before buying the car?

An aftermarket limited slip front differential will give you better traction coming out of a corner, yes. But most importantly it will prevent you from busting up your stock weak front diff, or if you catch it right away allow you to salvage your transfer case assembly by replacing just the differential. You can buy an aftermarket limited slip front differential before or after you blow up your stocker. But you will buy one if you are going to have fun with your car.