that kit will fix your problem, and i would agree that its a good idea to get the kit with wheel bearings.
For the lockout hub, there is not too much that can go wrong with them. There is an o-ring that seals the dial that you turn. My guess is that the o-ring is cracked or broken, or you have some corrosion in there. I think Hawk Suzuki sells replacement o-rings. You can take the hub apart yourself with a set of snap ring pliers. Just be careful not to lose the small metal detent ball and spring in the dial when you take it apart. Also, do not grease the hub when you put it back together. just spray the internals with some teflon or silicon spray before you bolt it back on the axle.
But then again, if you plan on doing a lot of wheeling a spare hub is nice to have on hand so you may want to buy another set anyway. Go to a junkyard and pick up a set cheap off of a geo tracker or sidekick.
From the ebay link that you posted:
Additional Makes / Models This Item Will Fit:
Make Model Years
GEO Tracker 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997
Suzuki Samurai 1982, 1983, 1984, 1985, 1986, 1987, 1988, 1989, 1990, 1991, 1992, 1993, 1994
Suzuki Sidekick 1982, 1983, 1984, 1985, 1986, 1987, 1988, 1989, 1990, 1991, 1992, 1993, 1994