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Mine is the same I have to hold the button down for full off. I don't run like that because it allows to much wheel spin for my needs since I mostly just rock crawl my XK. Once and a while when the sand is thick at the beach I hold the button down for some more wheel spin but thats about it.
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When off road I run mine with ESP full-off (requires holding down the button on my '06 whether in 4Hi or 4Lo). I don't like the ABS coming on when on washboard or cornering through the bumps. It also seems to work better on the dunes when turned off.
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As soon as I engage low range the ESP is fully off in mine. QDII 2007.
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It must be something they started in late production 07+.. I will start trying both ways and see what the difference is. My guess is in sticky situations like mud/sand the ESP off will perform better but wondering if rock crawling scenarios are better with ESP partially on...?
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I've always ran at Rausch Creek with it fully off and before the tcase issues never had a problem making it down any trail or hill climb.
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Ill try it with ESP OFF and see what happens