I see what you are saying here. However, in defense of the TOD, I think your "experiment" is only applicable in extreme situations, IE, rear end sitting in soup or on a perfect sheet of ice. Normally, the rear end is getting some traction, even if it is minimal, so that when the slipping begins in the rear, the TOD kicks on and send power to the front, making the TOD seem to operate smooth, more-or-less. Now, with the rear drive shaft out, you are going to experience a completely NON factory reaction to your experiment, so jerky stop and go action does not seem wrong to me, just natural for the TOD. Meaning, the TOD would rarely kick on from a DEAD STOP, as there is typically some forward momentum happening when it kicks on normally. Know what I mean?
All that aside, I see what you are saying about wanting a "normal" 4WD transfer case, but then I have no choice to go back and tell you that you bought the wrong vehicle to begin with.
I personally don't understand some folks extreme desire to turn the VX into something that it is not. The VX was not meant to be lifted 4"s, it was not meant to have a SAS, it was not meant to have a winch bumper up front, it was not meant to run 35"s, it was not meant to etc etc etc. However there are always people trying to make it do things it wasn't meant to do, and then they get discouraged or turned off or upset about it when these mods don't work out so much. And you know my answer to all of that (buy a Jeep, cough, cough). But again, all the power to ya.
On the contrary, got my VX front end back together, and removed the ABS speed sensors, tone rings, ABS fuse and the wiring, and she runs just fine!!
Bart