Here's a little advice from someone who's actually done this (for 4 years):
Weld the centre diff, don't muck about with the viscous coupling eliminator mentioned above.
Remove the front axles, you'll need to put the outer cv's back into the hubs to hold the wheelbearings together and use frost plugs to block up the holes in the gearbox.
If your vr4 has an all alloy transfercase (most likely unless it's an Evo0) you'd best get a steel case one and matching output shaft before you start.
If you still have 4ws you will need to get rid of it. Similarly if you have a viscous rear diff you will need to replace it, either with an open diff welded up, or preferably with a plate lsd from an RS.
If you have an Evo0 with the 4-bolt rear end life is made much easier as you can simply use a mech lsd from an evo1-3 in the stock housing, using the evo inner cv's and the rest of the 4-bolt axles - these will take a fair amount of abuse.
If you have a 3-bolt rear end, buy a pair of spare axles. How long they last depends on how much power/torque you have.
That's all pretty easy, go out, have fun, replace the odd axle.
Unfortunately it all gets a lot harder now - the E39A's main downfall as a drift car is it's piss poor steering lock, rack spacers will gain you a bit, but it's not long before you start rubbing the chassis rails at full lock, and there's no easy way around that.
Converting to north-south creates a tonne of problems, mainly because the steering rack is in completely the wrong place, the easiest solution (and I use the term very loosly) is to use a nissan subframe/rack/hubs/etc but that's a hell of a lot of work.
In short, for a bit of fun: do it. If you really want to drift, get a nissan/toyota.
Here's a vid of the first skid I did in mine many years ago, lol
http://www.youtube.com/watch?v=SUbFZXf7DT4