Ok, first of all the jerking. Is that a positraction rear end? If so, I would check the fluid level and if it's good, you might want to go ahead and drain the fluid and and add new fluid and the proper positraction additive, if it requires it.
Although, I suspect that the rearend may be causing the jerking, is it possible for you to describe the jerking more or if not does it appear to be the rearend?
If not, like you said it has been there before the engine rebuild, so other than the rear the only thing left would be the transmission. I assume it's an automatic, most 4wd's are. If so, do you have a stall converter?
Now, to the exhaust donut melting. Was there an exhaust leak there? Is it a dual exhaust? If so, start it up, let it warm up and go back to the tailpipes and feel and compare both exhaust gases. Put the palm of your hand out about 6 inches from the tailpipe. Don't get burnt so if it's too hot move your hand further away. Also, smell for a rich (gas smell) or lean (rotten egg smell) condition at each tailpipe. I usually just let the exhaust blow onto the palm of my hand and then smell my hand. Also, if the exhaust gas burns your eyes, that indicates a lean mixture, too.
Ok, now to the fuel pressure. I don;t know if that will effect the jerking, simply because that problem was there before, but it could be possibly the cause of the lean fuel mixture but it would effect both banks if you ask me.
The hesitation could be a ignition timing issue, so if you haven't checked that by alls means do.
A bigger spring? Is he talking about the mechanical advance of the distributor? I would think you would want more advance and therefore go with a weaker spring so the advance weights throw out sooner.