I have put over 100 LSD's of the same basic design in manual 2wd and Syncro trannies with NO problems..Same principle with the automatics and both built by Peloquins.
You never have to worry about turning it on or off as its seamless and works with no driver input. You almost never realize its there with No grabbing or chunking back there.
Not a clutch type diff that has both wheels semi locked together at all times, but has little gears/pinion and shafts inside that grab the wheel with the least traction. If one wheel is totally off the ground or with no chance of traction, they won't work so well. With throttle control and careful driving without a lead foot, you can get almost anywhere in snow. After using mine in 2 WD mode for a ski season, I am convinced they work 95+% of the time as are 99% of the customers I talk to about them. 
If you're going to have the trans rebuilt anyway, go for it. Ken at German Transaxle has them and is the one to do it.

Daryl of AA Transaxle
425-788-4070
"On the cutting edge of Old technology"
86 Syncro Westy with a Zetec in the trunk

-----Original Message-----
From: Vanagon Mailing List [mailto:vanagon@gerry.vanagon.com] On Behalf Of Loren Busch
Sent: Tuesday, October 19, 2010 10:26 AM
To: vanagon@GERRY.VANAGON.COM
Subject: Limited Slip In Automatic

Is there anyone on the list that has had the Peloquin limited slip kit added
to their Vanagon automatic?  Either from GoWesty or from any other source?
Not worried about the source or shop.  But, what do you think of it, do you
notice any difference in normal driving, and most of all, how well does it
work in snow/mud/loose dirt, etc?  Thanks for any responses on this subject.