I think there is a bit of a misunderstanding as to what a locking centre differential does and slight confusion over differentials. Without meaning to state the obvious to those who know, but here's a quick lesson for those too scared to ask:
Firstly, a typical 4x4 system has three differentials. One on the front axle between the wheels, one on the rear axle between the wheels and one situated on the prop shaft that joins the front and rear axles (located where the drive leaves the gearbox)
The axle differentials between the wheels allow the wheels on that axle to turn at different speeds. This allows the vehice to turn around a corner as the wheel on the outside of the turn needs to travel further than the wheel on the inside of the turn. The differential allows the wheel that is easiest to turn (the one on the outside of the turn) to receive the majority, if not all, the engine power as the vehicle turns. This has the unwanted affect in slippery conditions of diverting all the engine power to the wheel that's spinning, rather than the one which has traction.
In a 4x4 system not only do the wheels on each axle need to turn at different speeds to go around corners but in fact the front and rear axles need to turn at different speeds too (when going around the corner the rear wheels turn a tighter circle than the fronts. Each wheel on the car is turning different radius turns from each other) In order for the front and rear axles to turn at different speeds we need to add a centre differential. This differential (located just after the gearbox) will send power to whichever axle (front or back) is easiest to turn, in the same way the axle differentials favour whichever wheel is easist to turn. Again, the downside is the centre differential will send the majority of the power to an axle that has spinning wheels rather than an axle that has grip.
Still following the plot?
In effect what will happen is that in a normal 4x4 system the differentials will favour the easiest wheels to turn, resulting in occasions where only one wheel is in fact being powered. This could even be the wheel that is not able to grip whilst the other three are able to grip! A nasty demonstration of this is in Land Rovers where you have a transmission handbrake. If you jack up one wheel without chocking the others the differentials will favour the lifted wheel (as it's easier to turn) and result in the other 3 wheels losing their connection to the gearbox brake. Result, the car rolls away!
So here we come onto locking diffs. I know there are variations and differents degrees of open and closed, but this is just a "basic" description of the concept.
The idea of a locking differential is to take away the differential's ability to divert all power to a single axle/wheel. Instead it sends equal, or as near to equal as required, power to each side of the differential. In most 4x4 systems (like the one in the Duster) only the centre differential has the ability to be "locked" allowing power to be sent to both front and rear axles, regardless of which is easier to turn. However the axle differentials in these systems are not lockable so they still favour the easiest wheel on each axle. This results in only one wheel on each axle getting power in slippery conditions (as described in one of the posts above) Whilst this is not ideal, it is still an improvement on only 1 out of 4 wheels getting power without the locking differential! The reason the system in the Duster shuts off at speed is because to constantly drive with the centre differential locked, therefore sending equal power to front and rear axles, will cause "wind up" in the transmission that can destroy components and will also make the vehicle's turning circle larger and cause uneven tyre wear (besides from the fact the vehicle wouldn't corner particularly well!)
Some more competent 4x4's also have locking axle differentials which allow both wheels on the axle to get power. These differentials should only be used in slippery, low speed conditions as the vehicle would be virtually impossible to turn due to all the wheels being forced to turn at the same speed.
So, in the case of the Duster, the only lockable differential is the centre, therefore allowing at best only 2 wheels to remain powered under slippery conditions. In "auto" mode the centre differential favours sending the power to the front axle with the ability to send that power to the rear axle when required. The axle differentials on a Duster do not lock, therefore only one wheel on each axle will receive power in slippery conditions. This is not a failing of the Duster's system, but instead is characteristic of all 4x4 systems with only a lockable centre differential.
I hope this has been of use to anyone who wanted to know a little more about the subject.