Most 4 wheel drive SUVs use what is called a "part time 4 wheel drive system." It is the crudest type of 4 wheel drive. Within the transfer case, it simply connects the front drive shaft and the rear drive shaft together. This forces the front and rear differentials to operate at the same speed. This is a problem because the vehicle cannot turn properly. When a vehicle turns, each wheel needs to spin at its own speed. If the front and rear differentials are spinning at the same speed, this cannot happen. If you try to turn a vehicle where the front and rear drive-shafts cannot spin independently, the transfer case will be stressed, wheels will skip on the road, and something will break. This is why part time 4 wheel drive systems can only be used off road or on slippery surfaces: because the wheels have freedom to slip to release pressure on the drive-train.
To solve this problem, the front and rear drive shafts need to be able to spin at different speeds to enable each wheel to spin at its own speed during a turn. Enter all wheel drive. A traditional all wheel drive system uses a third differential within the transfer case to allow the front and rear drive shafts to spin at different speeds. This allows each wheel to be powered at all times, even during turns. All wheel drive greatly enhances handling in adverse road conditions such as snow and rain. One great application of all wheel drive is when there is some ice on the road. If the vehicle is going between patchwork ice, and road, all wheel drive will allow the vehicle to continuously operate without switching between 2 wheel drive and part time 4 wheel drive. The fault with most all wheel drive systems is that they are only used in light duty vehicles and usually lack a low range. For background, a low range is like a another transmission within the transfer case. It allows the transfer case to output at lower speeds and higher torque. A low range is usually used when off-road or when needing to pull something free.
There is a performance gap between 2 wheel drive and part time 4 wheel drive, and that gap is all wheel dive. Under normal sunny conditions, two wheel drive is appropriate. It is the most fuel efficient and no additional handling capability is needed. In light snow, rain, or ice all wheel drive is appropriate. All wheel drive gives additional control and safety. In heavy snow or off road conditions, part time 4 wheel drive is best.
The next step in handling adverse conditions are differential locks. These lock the differential so that the left and right wheels spin at the same speed. This is for very slippery conditions such as mudding or very deep snow. If we look at what is happening on a systems level, the engine powers the transmission, which powers the low/high range gears, which powers the differential in the transfer case. The transfer case differential then powers the front and rear differentials which power the wheels. This allows the user to select which differentials are locked, 2 wheel or 4 wheel drive, and if the vehicle is in high range or low range.
My gripe is that there is no vehicle which has this configuration and can be found with a manual transmission. Driving stick is amazing, but that is another post. Hummers, some Range Rovers, and the Jeep Liberty have this configuration but cannot be found with a manual transmissions. Other than some negligible additional cost, there is no real excuse to not have a transfer case with all of these modes. I myself would pay a premium to be able to own a vehicle this flexible.
As it turns out, there is a transfer case which can do these things. It is called a New Process 242 (NP242). The military and civilian versions of the hummer both use NP242s. In addition, the Jeep Liberty also uses the NP242. Thankfully, the NP242 can bolt up to many different GM based transmissions. The Jeep Wrangler Unlimited Rubicon is the perfect platform to accept a NP242. It has all heavy duty components such as a heavy duty suspension, front axle, rear axle, fully boxed frame to name a few. It also can be purchased with a manual transmission. However, this Jeep has the less capable part time 4 wheel drive system discussed above, but this Jeep's transfer case can be swapped out for a NP242 thus giving it more capability. Currently, this is the answer to the most capable modern SUV that can be found with a manual transmission.