The 4.2L is basically stroked out 3.8L. The 3.8L has storied history of head gasket failures. Early 4.2L's suffer from this issue, it's less of problem with the later ones though. My mother and step-father have a 1997 F-150 4x4 with the 4.6L and 3.55 gears. My dad and step mom just bought a 2003 F-50 2WD with the 4.2L and 3.31 gears. The 97 has a bit more power and returns 2 MPG better mileage overall. The 5.4L is good as well, but it had problems with spark plug ejection in the 97-98 models. The 99-03 models have the P.I heads and intake (on the 4.6L and 5.4L) which improves power and fixes most of the spark plug issues.
Our family has had pretty bad luck with the Ford 3.8L, having suffered blown head gaskets with a 1995 Windstar, a 1995.5 Windstar, and a 1998 Windstar. All failures happened before the 60k mile mark. The only Ford 3.8L that we had that didn't give us any problem was the one in my old 1992 T-Bird SC, I chalk that up to the fact that heads on the SC were a different (low compression) design.
But if I were looking for an F-150 I'd steer clear of the 4.2L.