This has been a question that has never been answered. I know some about electronics and have done the 1-2 mod on mine and another XJ (90 and 91). I also have a factory service manual from a 99 and have sat down trying to figure it out for those years. It does not look possible. The ECUs are completely different and by the looks of things, the fluid paths are different in the newer trans than the older trans. On the older ones, you can just activate the #2 solenoid and get 2nd gear.
I'll sit down with the manual again and see if I can figure out a way to do so, but not having a vehicle to try it on will be a problem. Even if I did come up with something, would you really trust me enough to try it?
As for why do the mod, here's why I did mine:
I was wheeling in the snow in Oregon with it locked in 4lo. I was using the selector in 1-2 for the control and engine braking. We'd sometimes get some speed on the flatter portions of the trail where first was revving high. The only way for an AW4 to go from first to second without moving the selector is to reach around 4700 RPM where the TCU forces an up-shift, but then when you slow down, it slips back into first. While wheeling along in first, I wanted second. To get second and not third, you pop it into 3 and shifts into 2nd or 3rd, then you pop it back into 1-2 and you get second, but when you slow down enough, it goes back into first. In 4lo, when you the TCU goes back into first, it is somewhat violent, and when on the snow, it causes all 4 tires to momentarily lose traction. I didn't feel completely in control when this happened. This is probably one of the best mods, and others will agree, but like stated, it's not available for 96 (some 95s I believe too) and newer.
Steve