4WD grinding?

From the description it sounds like an issue in the T-Case itself. That would account for the lack of 4L and the grinding. It is most likely in the clutch area of the case as you have the auto-4WD option and that is a failure point. Testing it isn't that hard. First you drain the fluid out of the case and look for metal in the oil. The drain has a magnet and is item 27. The fill is 28. If you find metal, then you pretty much need to either rebuild it or replace it to get 4wd back. Now if you don't find metal then you can disconnect and remove the front drive shaft. To do that you remove the straps that hold the U-joint to the front axle. Then remove the clamp that secures the boot on the transfer case output shaft. Then pull the shaft free. Now shift into 4wd and see if the noise is still there. If it is you have your answer. Swapping the case out isn't really any harder than the work you have done already, however you need to look at the code on your current T-case as there were multiple revisions that don't interchange.