Jeep ran Denso alternators from '91 and up. All Dodge/Chrysler/Jeep Denso alternators are externally regulated, so the 2002 Durango alt will work in your jeep, from a strictly electrical perspective.
However, there are some physical issues you need to consider. The back of your '96 alt looks like this:
http://www.sparkplugs.com/services/...tImages/3/211-0129_E.JPG&width=300&height=300
The back of the 2002 Durango alternator looks like this:
http://www.sparkplugs.com/services/...tImages/3/210-0484_E.JPG&width=300&height=300
You'll notice that the B+ post on the Durango sticks out the side, instead of sticking out the back. That's because the Durango uses a different, higher-capacty rectifier to handle the higher amperage output. So don't try to swap your '96 rectifier to the durango alternator. Also, you have a different terminal for the other two wires. I'm sure you can just bolt your B+ wire to the side terminal on the Durango alternator. And you might be able to swap your 2-wire terminal from your '96 into the Durango alternator. Swapping the 2-wire terminal would at least involve cutting the rear cover on the durango alt. Another option is to convert the wiring on your Jeep to fit the new Durango alternator.
So ... you will have some challenges with the wiring hookup. It can be done ... I'm sure there are writeups somewhere, but I don't know off the top of my head. If you decide to mount the Durango 160 to your '96, please post pics of how you did it ... that would be a big help to the rest of us.
The Durango alternator is also fatter, so you'll need to grind your alternator brackets to accommodate that.
Another option you might want to consider: The 1998 Grand Cherokee had 136 AMP alternators as an option on their 4.0 and 4.7 liter motors, and standard on their 5.9L V8s. I believe the Denso Part number for the GC 136 amp alternator is 121000-4170.
The back of the GC 136-AMP alternator looks like this:
http://www.sparkplugs.com/services/...tImages/3/210-0151_E.jpg&width=300&height=300
You'll notice that the only difference in the wiring hookup between your '96 XJ and the '98 GC is that the B+ insulator is clocked differently. You might be able to simply unbolt and turn that insulator, or swap the insulator from your XJ. Either way ... it's an easy fix.
The GC 136 alternator is also fatter, so you'll need to grind your mounting brackets.
Another thing to consider: you should also upgrade your charging wire harness to #2 welding cable to efficiently handle the extra amperage. See this thread here:
http://www.naxja.org/forum/showthread.php?t=1069291
Hope this helps.