It sounds like like the transfer case is having an issue, I would remove the drain plug to the fluid to see if there is metal in the case. If so it will need to be rebuilt here are diagrams to help you get the job done. Check out the diagrams (Below). Please let us know what you find. We are interested to see what it is.
Images (Click to enlarge)
Saturday, June 15th, 2013 AT 11:41 AM