Benefits of the 2nd gen diesels...
More comfortable interior, better handling, MUCH stiffer frame (the 1st gen frames were somewhat marginal for the 160 hp engines they received), stronger axles in the 2nd gens, MUCH MUCH MUCH better manual transmissions in the 2nd gens (to the point that the ONLY way to get a good one in a 1st gen is to put an nv4500 from a 2nd gen into it), better (though still kinda crappy) auto transmissions in 2nd gens, MUCH MUCH more power potential from a 2nd gen due to having the bosch p7100 injection pump instead of the bosch rotary pump...
The only real downside I can think of to a 2nd gen is that the front suspension/steering is junk on the 4wd's. There're parts out there to fix them correctly, but you have to spend some money to do it.
(by 2nd gen, I mean the '94 and up trucks, in this particular case being limited to early '98 or earlier. A mid '98 or later will have the 24 valve engine, which due to the crappy fuel system is considerably less reliable than the 12v.