No. the Armada does not have an inferior 4x4 system. Let me take a stab at trying to explain what we have and what we do not have and how it differs from other systems.
The Toureg and other european (and some Japanese) four wheel drive vehicles rely upon a full time system which is a good compromise for vehicles which are mostly used on the highway but which encounter slippery conditions like snow and ice. It is a good system.
That system usually has a center differential, typically a Torsen type system that lets that center diff distribute power as the computer tells it and sometimes, in centain models, allows it to be locked for true off-road work. This system is smooth, but it consumes more fuel and tends to wear out parts more quickly than other systems. It is expensive.
On the other hand, those of us who are seriously into off roading prefer to have separate differentials front and rear with a transfer case in the middle that allows all the power to go to the rear axle under normal conditions, or to select 4 high or four low, to send power to the front axle.
Differentials that are open only send power to the right rear and left front respectively unless there is some type of traction control system. Limited slip systems, usually with clutches, but sometimes with gears, can transfer some of the torque to the other axle. Locking differentials utilize a ratcheting system that locks both left and right axles on a differential to each other, but still allows one side to ratchet when going around corners.
These systems can be full-time or part time and can operate several ways. A part-time system actually interrupts the power to the front differential at the transfer case. Such a system, when in 2wd, does not turn the front drive shaft, and thus does not turn the front differential or axles. This is the simplest and most fuel efficient. When in 4 high or 4 low, the front drive shaft turns, which activates the front differential and axles.
We have a full time system, but with front hubs which lock and unlock electronically. If you select 4 high or 4 low, the front hubs lock, and power is applied to the front. Until then, however, the front hubs free-spin, even though the front drive shaft, differential and axles turn all the time.
When in "auto" mode, you are in 2wd high range. But since the front drive train is always spinning except for the front hubs, the computer can be programmed to sense a slipping tire at the rear of the vehicle. It uses the ABLS system, which has sensors that detect whether one wheel is turning faster or slower than the others. Upon detecting slip at the rear, the computer will lock the front hubs, activating the front system.
ABLS (automatic brake limited slip) also adds the feature of working like a limited slip differential for each axle. The computer detects slip and transfers power from the slipping wheel by applying braking to that wheel. This transfers torque to the other wheel on the same axle.
So, most people familiar with this system would recommend keeping the selector in "auto" all the time unless you are off road. If in 2wd, you cannot ever get power to the front wheels, because those hubs are unlocked. If in "auto" you get power to the front only when you need it.
In 4 high or 4 low, you get power to the front even when you do not need it. There is no clutch or viscous coupler in this system and if 4 high or 4 low is engaged and you are on hard pavement, you can get drive train bind and things can break if a wheel on one axle is turning faster than a wheel on another axle, such as when going around a corner.
Our system represents a very smart electronic solution to the problem of how to get traction to all four wheels, only when needed. This system does work very well, but does make some noises when the hubs lock in and unlock and when brakes are selectively applied to one side and not the other.
A dedicated off-road system (my CJ-5 Jeep is an example) would have a manual, selective transfer case that with modification can even allow you to have front wheel drive only, rear drive only or both, and typically would have manual locking hubs on the front axles which you lock or unlock by a twist of a know at the center of each front wheel. You manually control everything.
That system would usually have a real full-time locking differential in the rear, and either another locker or a limited slip in the front. That is the best system for playing in the dirt, but can have some adverse effect on handling on pavement.
I hope this was more help than confusion!