01-03 LB7 Duramax is an awesome engine. There aren't flaws to avoid in hard components, but rather subtle changes of which you may want to take note.
Some 01s and 02s had issues with busy downshifting from 5th to 4th when towing. The problem was fixed in 03. Previous years can have new programming uploaded. This was the problem with Higg's 01. A free trip to the dealer is the fix.
A few 01s had issues with injector grounding, but 02+ got the fix.
California emissions gets you a cat = soot trap.
04.5+ LLY Duramax has an EGR with a cat - no bueno.
2500 HD comes with 245 tires; 3500 come with 265s
03+ have a cool center console
Bose sound is awesome
ZF6 speed manual is a good tranny, but is nowhere near as strong or as capable the Allison
The leather is real nice.
My opinion on the best deal is exactly what Dave O and I have - 03 2500 HD crew cab short bed. You get all the significant benefits of the later model upgrades without any of the pesky little problems common in earlier year models.
That's all I can think of for now. Like anything else, look for low miles, right color, and the right interior.
Our truck:
http://www.oliverdiesel.com/vehicles/dmax.htm