Keep the lip on. That is how you learn how much / little clearance you have. If you remove the lip, learning is going to be more expensive because you will end up learning off of something that it involves paint and hard surface repair.
I have a 2000, so I can't comment on the early lip. Unless you have managed to tear a chunk out of the lip, it is not too hard to refurbish the lip to a good appearance. On my 2000, the surface scratches will sand out fairly easily with an orbital sander and hand finishing. I then do a complete surface sand to scuff it up, spray on some adhesion promoter and then apply the final coat of paint designed for flexible surfaces. Lots to choose from in that last category. The adhesion promoter that I use claims to have the ability to fill small surface irregularities - seems to do the trick. The refinish may not be like new; but, it is good and the repair will not be obvious unless you get down there and look. Finish durability has been good. I need to touch it up every couple of years because I appear to need to relearn how little clearance I have, not because the paint has failed.
If the lip has been whacked, get under there and check the mounting clips. Some may have been pulled right out of the lower bumper so that may require repair or at least replacement of any missing clips.
Significant gouges in the lip can be repaired. There are flexible fillers around that will do this; but, it requires some skill / experience beyond sanding and using aerosol spray bombs.