The only difference between an HD and non-HD trans is the differential, output shaft and the differential housing cover. Replace those 3 items from an HD trans and your all set.

You will also need to change the passanger side axle I believe.

Does the HD trans come with a limited slip diff. from the factory?

No, there is no factory available LSD for these cars.

GM does make an aftermarket TORSEN design LSD that is available however.

From my limited knowledge of Torsen diff'*, is it true that if you actually lose traction in one wheel, the diff essentially turns into an open diff and therefore useless in performance applications?

I've not heard one way or the other on that. We have our own LSD that we use so I have no personal familiarity with the GM torsen design.