I'd go for the H4 to get the condenser mics. Then the recordings might be good enough to listen on your stereo. H2 has dynamic mics. H4 also has input jacks so you can record line in from FM tuner, mixing board, etc. The H4n adds true coincident mics which will improve stereo imaging at high frequencies and an improved quality mic input amp. How much improved is the question, it's still a handheld.
H4n has a lot of other convenience features worth considering. Longer battery life, USB2, remote control option, supposedly better sound quality input amp, speed bending for play along practicing. Loop function is much more important for practicing, but it doesn't have that.
http://bhphoto.com sells H4n for $349US (448AUD.) UPS to australia is $63USD.