This all sounds normal. But that doesn't make it any more tolerable. Many of us have had the same issues...some of us multiple times. The front axle is way undersized for a 5500lb vehicle. Even with stock tires, its at its limit for 4-series gearing. Having an optional 4:1 t-case nearly doubles the torque on the input side of the axles. Then adding big luggy tires increases the load on the output side. So you can begin to see the problem...no engineering degree required. Its just too small for this kind of off road use. A cast iron case is certainly better than aluminum but, its not near as rugged as it needs to be. There is no quick & easy upgrade, so you're stuck with replacing your broken junk with brand new identical junk.
The only real way to prevent a broken front axle is to be easy on the gas pedal, avoid tire-spin as much as possible, and don't apply too much power with the wheels turned to full lock. The H3's front end is fragile, and you must gently crawl over obstacles and let the computer do its thing. The tried & true (Jeep) method of backing-up and hitting it again with more throttle...will surely result in an exploded front end. Perhaps the worst thing about the H3's breakage is the full-time 4wd layout. Because you can't shut off the front axle...they tend to completely eat themselves before you can get off the trail. Minor breaks...turn into massive damage on the drive home. I suspect the only parts you'll salvage are the case, the drivers-side tube, and the stub-axle inside it. The diff itself, ring & pinion, bearings, seals, etc. are most likely all junk. Notice, I didn't include: half-shafts, drive-shafts, t-case, or steering rack...all of which are also subject to being damaged.
When you consider the labor and parts chasing to rebuild one...I agree that a completely new assembly might be the way to go. Hopefully the dealer will get you fixed up.
You are pre-approved for a second mortgage, right?