[Richo]

Rediculous repair costs on common faults like cylinder head issues would dictate that you should avoid diesel XJ's.

I too was dubious about an auto petrol, but after owning one for a couple of years loved it. Auto makes them a good daily driver and very usable and flexible offroad.
$4-$5k should get you into a reasonable one, maybe even with some minor off road mods. They are bombproof engine wise, but have some common issues regarding crank sensors and other minor things, most of which is an easy fix.

They are fairly capable offroad as standard, and with usual mods can be made even better. They can be thirsty when driven hard though.