Well, no. But it does have a heavy-duty suspension, 7.5" of ground clearance, and all-wheel drive. It is a good little (yes, it is small) `off the paved highway' vehicle, great for car-camping, hauling mountain bikes and kayaks, and the like. And, unlike most `true' SUVs, it gets decent mileage, it has good crash-test scores, and it has a very `car-like' ride. If you are going to drive on a Class V jeep trail, you probably want a Jeep. If you are just going on dirt roads, or up to the mountains (in the snow), or -- and this is after all what most of us do most of the time in our cars -- just heading for the store or commuting to work, the Forester is well-suited to the job. That is why I bought one, at any rate.
The US models of the Subaru Forester (through 2001 at least -- beyond that, my crystal ball is cloudy) do not have a low range. (The Aussies have it.) That makes the decision harder.
The 5-speed manual transmission (MT) uses a viscous-coupled center differential. This splits torque (wheel turning power) 50:50 at all times -- half goes to the front wheels, and half to the rear. The 4-speed Electronic Automatic Transmission (4EAT), on the other hand, has a fancy computer-controlled center differential. It splits torque 50:50 in first and second gears, and, under normal (dry pavement, good traction) conditions, 90:10 (90% of the torque going to the front wheels) in third and fourth. In other words, in third and fourth gear, the 4EAT acts a lot like a front-wheel drive transmission.
Towing.Some people like to tow a second vehicle behind a motor home or camper. If you want to do this with a Forester, you may need a flatbed, so that you can tow it with all four wheels off the ground. The MT can be towed in neutral with all four wheels on the ground. Personally, I am not sure why one would tow a Forester behind a motor home -- if I had a motor home, the vehicle I would want to tow would either be something really small and gas-miserly (maybe a little Toyota, or a Geo Metro, or an electric car), or something for really serious off-road driving, like a Jeep Wrangler. But this is an advantage.
Neutral steering.If you mash down on the gas pedal in a car while turning the wheel, different cars will steer differently. FWD cars typically understeer, and RWD cars typically oversteer. This is due to the placement of the drive wheels.
With RWD, the back end of the car tends to push itself in a straight line even as the front end of the car turns the way the wheels point. This makes the back end `slew around', as it were. The car ends up turning more than the angle of the steering. With FWD, the opposite occurs: the front wheels drag the rest of the car forward, so that the car turns less than the wheels. Right in between is neutral steering.
Because the Forester MT has a 50:50 torque split, it tends to exhibit neutral steering. Apparently people who do a lot of racing find this desirable. Of course, most people learning to drive, at least in the USA, use front-wheel drive cars these days, so they may be better off with a bit of understeer. In any case, this only applies to turning while stepping on the gas. (The 4EAT has a variable split, so it will vary between neutral and understeer, which could be confusing. I have not tried to experience this in my own car yet, so this is all theoretical.)
Close ratio gearing.The MT has an extra gear. The bottom and top end gear ratios in the MT and 4EAT are actually virtually identical, so this means the MT has more `middle' gears. That in turn means that you can keep the engine in its best-power band, so you can accelerate a bit faster. (Auto transmissions generally shift faster than humans, so this advantage is not very big. Of course, if you have the auto, you have to depend on its getting the power band right.)
Faster.With the MT, you can get a much faster start off the line (for racing). You put in the clutch, rev up the engine to redline, and then `dump the clutch' (let it out rapidly). Since the engine is already revved up, you get a faster take-off. Of course, this is very hard on the drivetrain, but it makes a big difference in 0-60 times. Also, there is no torque converter, so when the clutch is fully engaged, all of the engine power goes straight to the wheels.
Fuel economy.The MT gets slightly better highway mileage, by EPA estimate. The city estimates are identical, oddly enough, or even just slightly higher for the auto (2001 model estimates).
It's cheaper!`Well, duh,' as they say. The 4EAT is an $800 option (MSRP; $719 invoice). Also, the MT has fewer parts that can break, and should cost less in service on average over the life of the car.
You don't have to shift.`Well, duh,' again. It means you can keep both hands on the wheel (or drive one-handed if need be). The lack of a clutch pedal means you can drive one-footed as well. The latter (various medical problems between me and my dad, really) is what drove me to buy an auto.
Reduced wheel scrub.I am only guessing here, but I suspect that the 90:10 split will help hold down overall tire wear during highway driving.
Torque converter substitutes for low range.This one is a bit tricky. Since the US model has no low range transfer case, if you have to go very slowly in the MT for some reason, you must slip the clutch. The torque converter in the AT is designed to slip, so you can crawl a bit more easily.
The real advantage of the rear LSD is that you will not get stuck even if both side wheels are on ice or in mud. Although the Forester is `all-wheel' drive, that just means it has a center differential, and sends power to both front and rear wheels. Those differentials in turn split the torque (already split either 50:50 or variably) to the two wheels at the front and the two at the rear. The center differential is already slip-limited in some way, but the front and rear are both open, in the L. That means that if one front tire, and one rear tire, are both on something slippery, those two tires will both spin, and you will not go anywhere. Usually this happens if you pull off the road a bit and wind up putting two side tires on ice (or wet grass or mud). You could conceivably get the left front and right rear, or right front and left rear, on ice or in mud, but `both side tires' is a lot more common.
If you plan to do lots of snow/ice driving, you might want to get the S, and then buy a set of four 15" steel rims and snow tires. (The 16" rims take P215/60R16 tires, so get /70R15 tires and you will have the same `rolling diameter', because the /70 means you have a higher aspect ratio or `profile', i.e., more sidewall rubber.)
Differentials come in lots of variations. The simplest is the `open differential'. In this configuration, a drive gear (connected to the engine through the transmission) turns a moderately complicated set of gears (`pinion' and `spider' gears) that turn the axle shafts, and the axles then turn the wheels. Averaged together, the turning speed of the two wheels will always be exactly the same  as the turning speed of the drive shaft. Normally the two wheels turn at the same rate, but if one gets `stuck' somehow, the other one can just turn twice as fast, taking all the power. You can even put the vehicle up on a lift and turn one tire while the car is in gear (so that the drive shaft cannot turn). The other side tire will simply turn in the opposite direction, so that the average of the two wheel speeds is zero. This means that if one tire is on something very slippery (such as wet grass or snow or ice), that tire can spin twice as fast very easily, and the vehicle will just sit there spinning the one tire. The physics of this is like water running downhill: the torque, or twisting force on the wheel, takes the path of least resistance, whatever that is.
Obviously, spinning one wheel is not very useful, so people have come up with ways to avoid this. The problem is always the same: we want the torque coming from the transmission to go to the wheels, but we want the two wheels themselves to be able to go at different speeds. When the car makes a turn, there are other torque forces coming from the wheels themselves. In an open differential, this power can go right through the differential to the other wheel, which is why you can turn the other wheel backwards when the car is on a lift. In essence, the open differential treats all three objects -- the two wheels and the drive shaft -- in the same way. It just makes sure that all the forces balance out, in the end.
One solution is a `locking' differential. Here, you can engage a set of gears that just force both wheels to turn at exactly the same speed -- as if there were no differential at all. This works quite well in slippery situations, and if the road surface is slippery enough, you can drive around in this setup all the time. When you make a turn, one wheel will just slip. If you do this on dry pavement, though, where the tires have lots of traction, you will get a lot of wheel scrub, and put a lot of stress on the drive train.
Another solution is a `limited slip' differential. Basically, we make the observation that the car never turns all that sharply in the first place. The vehicle has some particular turning radius, and when it is turning in the tightest possible circle, the outer tire turns, say, 20% faster than the inner. (Given a 30' radius, and tires five feet apart, the outer tire goes in a 30'-radius circle, and the inner tire goes in a 25'-radius circle. The circumference of any circle is just 2*pi*r, so the inner tire goes about 157', and the outer tire goes about 188'. This is really just 30 divided by 25, or 1.2 -- 20% more distance to travel in the same time, hence 20% faster.) So, if we can find a way to make the differental `lock' whenever one tire goes more than 20% faster than the other, we will limit the amount of slipping, without preventing the car from making turns normally. Limited slip differentials often use a `viscous coupling' fluid -- some sort of thick fluid that allows some amount of slip, but beyond that, stiffens up and makes both output shafts turn at similar speeds.
One very nice, but expensive, solution is the Torsen® or `torque sensing' differential. This is a device that allows transmission torque to flow to the wheels, but prevents wheel torque from flowing across the differential itself (i.e., from one wheel to the other). Moreover, whenever one wheel starts taking more of the torque, some gears inside the Torsen differential actually move and change the torque-splitting ratio. The variability of the split can be adjusted, so a Torsen differential can be designed especially for any given application. Torsen differentials can be used as center differentials too. I believe the tow tugs for airplanes use multiple Torsen differentials. At least one Audi AWD vehicle has Torsen differentials, too.
There is one remarkably simple solution that does not require any fancy internal structure at all. Instead of mucking about with the open differential to make sure that some torque goes to each wheel, just use the brakes! Since torque `flows downhill', as it were, if you apply the brakes lightly, the effect is like putting a small diversion dam in the torque stream. A wheel that used to spin freely (on ice, for instance) now has some resistance (the brakes). The torque cannot flow over the resistance so it has to go to the other wheel instead. This process can be made automatic, using the anti-lock braking system: if one wheel is spinning too easily, the ABS can apply the brake to that one wheel. While that means that the engine `fights' the brake on that wheel, it also forces the torque to go to the other wheel. This will tend to wear the brake pads a little faster, but because the system can have the very simple open differential, it saves weight and cost, and there are fewer parts to break. (It also only activates during slippage, and braking a wheel that is spinning freely is good for control in general anyway. Once the wheel slows down, the tires may get a chance to grip the road surface again.) Like the limited slip differential, this must be tuned to account for the normal amount of `outside wheel goes faster around corner than inside'.
more on AWD
Effect of a limited slip or locking differential.Imagine this is a car with a limited-slip (or currently-locked) rear and center differential. The solid lines "tie" the wheels together. The tires on wheels C and D must always turn at the same speed, and that speed is the same as the `average' speed of A and B, as it were.
One typical problem with snowy or icy roads is that both side tires -- A and C, or B and D, here -- will be on ice. This can happen if you have to park on the side of the road, for instance. Suppose tires B and D are on ice, and imagine that that the rear differential were open (like the front one). The engine would spin the drive shaft -- the vertical center line -- and that would spin tires B and D, which turn freely. Since A and C are not directly connected to B and D, they can both remain completely still. But with the rear differential locked -- the solid line shown above -- tire C has to turn at the same speed as tire D.
Of course, if you get three tires on ice, so that both rear tires spin freely, the solid connection here does you no good. Tire A or B (whichever it is that has traction) sits still, the other front tire spins without moving you, and both rear tires spin too. On the other hand, even if both front tires and one rear tire are on ice, the one remaining rear tire can get you unstuck.
 My definition of `true SUV' here is: 9 or so inches of ground clearance (with enormous approach, depart, and breakover angles), low range, and tows about a gazillion pounds. Of course, a lot of truck-based SUVs do not fit this definition either.
 Actually, the axle half-shaft rotation speeds averaged together equal the drive-shaft rotation speed divided (or multiplied, depending on how you look at it) by the rear axle gearing ratio. Here are some back-of-the-envelope calculations. Suppose the engine runs at 3000 RPM, and the transmission gear ratio is 1:1, so that the drive shaft turns at 3000 RPM (or 50 revolutions per second). If the tires spun at this speed, and were 20 inches in diameter, the car would go about 178 MPH! This is 20*pi (62.8) inches, or 5.23 feet, times 180,000 revolutions in an hour, divided by 5280 feet in a mile. I am not sure what the actual final drive ratios are in the Forester, but this is off by about a factor of 3, and I believe the top gear is an overdrive (drive shaft RPM greater than engine RPM). That implies the axle divisor is somewhere around 3.