An AOD-E is the electronic version of the AOD. A TV, some valve connected to the tranny and the carb, controls the original AOD. The electronics in the AOD-E replace this TV and some other internals; this means you need to have an external 'black box' to control the AOD-E in an old car. For the AOD, you just need some linkage to take care of the TV. That is the short version, there are other things to the conversion, but that explains the difference between the AOD and the AOD-E.
As for which to use, like everything else, it depends. The AOD was used for a long time and the early ones are problematic. The ones from 4-cylinder mustangs are different and weaker than the ones from v-8's. They cannot handle a v-8. But once you have the correct AOD hooked up, you’re all set, 4-speed auto in an old car. The AOD-E on the other hand is the culmination of all the work on the AOD. They also used the same tranny on v-6 and v-8 mustangs, so you can use either one for an upgrade. Of course, your electronic skills come into play at this point and you need a computer to 'adjust' things to your liking. Being newer and electronic, they tend also to be more expensive.
Ahh...an excellent question that I've been going back and forth on myself.
AOD Good Points
Requires no special electronics
Windsor Fox and others make and sell everything you need for the conversion
New AODs are available for $1200 and less
AOD bad points
Requires a TV sensor (all that's available from WindsorFox)
Good used 1993 and older units are extremely difficult to find
Rebuilds in my area run $1000 plus Core
AODs have a lot of variability. Evidently the ones for V6's were crap and shouldn't be trusted. Ones off of V8 mustangs (especially by '93) were much better. You really have to know where it came from, when buying a used one.
AODE Good Points
If you get one with the right bell housing configuration it is going to be a good unit...even the V6 models are strong.
It has all the mechanical updates made to the AOD over the years to make it better.
They have a lower first and second gear, giving better performance off the line.
Good used ones are available...because they still put the tranny in new cars, which daddy's buy for their 17 year old girls, who promptly total them...yielding a good "low cost" transmission source for you and me.
AODE bad points.
Electronics requried...either as part of a complete 5.0 conversion, stealing the donor cars computer or via a stand alone transmission controller like the Baumann Engineering TCS (I think these are like $500 with the harnesses...but don't quote me on that.)
Shifter hook up. This isn't completely understood by me. The windsor fox kit evidently won't work. An aftermarket cable shifter will work (those can run $100 to $200). If there's a way to make the stock shifter work with an AODE I can't find out what it is.
Crossmember availability. The WindsorFox crossmember doesn't work for an AODE. Evidently you need to either buy an aftermarket one and refrabricate it to work for the AODE or just build one from scratch.
Of course both the AOD and the AODE give you Overdrive at 1.33 to 1. Hooking up either of them will probably send you to the exhaust shop, to have your pipes rerouted around them. They are quite a bit wider than a C4. They are heavier than a C4. They are MUCH more expensive to have rebuilt than a C4. You'll probably need to have your drive shaft shortened.
I'm running out of steam. I've researched this for about 18 months, and I'm no closer to figuring it out than when I started. Alroque here on VMF has an AODE. He's probably the VMF expert on the subject. I've got an AODE, the Baumann box, the wiring harnesses, a flex plate, and a stock torque converter I bought off of Fullthrottle (he posts here occaisionally) that I am looking at putting in my '65 convertible. The shifter hook up has me worried. I've contacted DVS restorations in Crawfordsville, IN about putting it in for me...and the guy there thinks it would be no problem. But, you know how problems tend to multiply after you actually get into a project. I've also contacted Mustangs&Fords to try to get them to do an article about the AODE 4r70W swap, but have received no reply of any kind.
So...to make a long story short. You PROBABLY want to buy an AOD. That's what most people get.
Don't know about the AOD-E, but with the AOD, the drivehshaft does not need any modifications if you use the AOD yoke, and a driveshaft from a C4. I just attached the AOD yoke to my stock driveshaft using stock '66 u-joints and bolted it right in.