You're starting to mix things up a bit.
Both the KJ and the KK will have open diffs - though some KJ models would have the TrakLock diff in the rear which is not a locking differential but kind of a 'reduced spin' diff. And as quickly as the TrakLock wears out any KJ you look at will have open diffs even if it came from the factory with the 'trash-lock.' Some KK's may have the brake lock system which applies brakes to the spinning wheel to send power to the wheel with traction. Kind of like an auto locker but not a true, locked differential.
Open diffs mean that - even if in one of the 4WD modes - the tire with least traction on either axle will spin, for instance in mud or if the tire is off the ground. So 4WD is really a misnomer cuz at any one time only one wheel on each axle is really powered if the other wheel on the axle is on a very slippery surface.
As for the transfer case:
For off-road the Part Time or 4Lo functions are best. Part Time enables you to run normal speed (slippery surfaces ONLY) while in 4Lo you can go no faster than about 15mph. In Part Time and 4Lo the front and rear axles spin at the same speed - no differentiating between them, hence the crow hop and binding on dry or high traction surfaces. The differentials on each axle are still open unless you put a locker in them.
The SelecTrac Full Time can be run 12 months a year on any road surface. Great for driving around town on a snowy day or to just keep the transfer case nice and lubed up (a good idea to do with the SelecTrac transfer case) for when you really need it off road.
As for the KK selector: If it only shows 2WD, 4WD Lock and 4WD Low it is the CommandTrac II case and functions like the KJ's CommandTrac Part Time case. If the KK's selector shows 2WD, 4WD Auto and 4WD Low it is the SelecTrac II and functions similarly to the KJ's SelecTrac Full Time transfer case. You can switch to 4WD Auto any time and drive it on any surface - dry, wet, snow, etc - with no problems.
I have the SelecTrac Full Time case in my '03 KJ and like it's flexibility. It's finicky (tires MUST be the same size) but it has served me well on the street and off-road. It has 5 positions on the shift handle (2WD, Part Time, Full Time, Neutral, 4Lo.) The CommandTrac has 4 positions (2WD, Part Time, Neutral, 4Lo.)
Here's a link to Jeep's explanation of the SelecTrac II system in the KK:
http://www.jeep.com/en/4x4/#CommandTrack2,SelecTrac2,Bob