[ImperialCrown]

The axle output stubs are splined into the differential side gears. They aren't directly supported by a carrier bearing or a differential seal. Some play is alarming, but probably normal. I have been able to grab and rock up and down the inner axles on these cars that drove fine. I wouldn't worry about it. I would change the diff fluid with fresh SAE 90 hypoid fluid and use the better ATF+4.
The 1994 and 1997 42LE transaxles may require different electrical connectors and TCMs, I don't know. A Hollander's parts interchange manual or Valiant67 may be able to answer this question better.
You can Google for a Chrysler 41TE/42LE service manual online. Sometimes they show up for a time and then are taken down by the copyright holders.

http://oskin.ru/pub/chrysler-dodge/manuals/ATSG_Transmission_Repair/ATSG_42LE_A606.pdf

 

[valiant67]

All I can say is traction control is a function of the ABS and engine computers, not the transmission.
I suspect you will run into electronics issues but don't know what all on that particular car.

 

[moparroy]

According to Transtar catalogue the change in the range sensor connector on the A606 / 42LE was from 97 to 98 so you might be ok.:

410E Sensor, Range (Blade Terminals) (A606, 42RLE).................................................... 1 98-Up 62410B 4659677A
410E Sensor, MLPS & Neutral Safety (Round Pins) (A606) (Repl 7 & 9 Prong)............... 1 93-97 62410A 4659492AC

Even if they are different I think you can swap either the whole valvebody or just the range sensor on the valve body and likely good to go I would expect.
TCM programming may be different but it should run fine - I swapped parts out of a 2002 into my 1995 - not everything will work though...

On the drive shafts couple things I learned on my 1995 Intrepid - make sure the snap rings on the end of the inboard CV joint are fully seated inside the differential gears - should not be able to slide the splines without significant effort / pry bar. I did not get the passenger side seated right once - a couple years - yes year - later it came out on me and left me stranded (though the trans was done but it was just the drive shaft had disengaged from the diff.
Also at that time I replaced the drive shaft cause the splines were slightly damaged - I have noticed recently the center section between teh two CV joints on that shaft has excessive play - not sure how much but I would bet 1/8" at least. It has been in the car for about 3 years now. It only became annoying when I redid the suspension on the car - now when I go over repeated bumps / rumble strips it rattles. Not sure if there is supposed to be a spring in there or somethig but it moves freely.