My answer is : YES !
The standard XTE shock is even worse than the older ones (no damping regulation) and 7 yrs means that probabily is already leaking.
Logically , the heavier the weight, bigger the problem, but a "finished" monoshock on rough terrain represent more fatigue, less control and more risks..Good advice also to change the springs with progressive ones,
for cheaper but good alternatives to Ohlins & WP you may look to
www.bitubo.com (good shocks and lot of models also for old models) or Koni (have not a link.)
On your bike I also would change the carburettor with a TeikeiY27PV (the model mounted on older teneré and XT's) to regain the original power (and low-down punch so good and useful) and alloy rims - all these peices is possible to find very cheap from uesde parts and wreckages..