1989 Toyota Corolla Vibration/rubbing while turning wheels

My 1989 Toyota Corolla DX Sedan All-trac makes a grinding/rubbing noise while moving in forward or reverse when steering wheel is almost full left or right. This does this when the AWD all-trac button is engaged in the "Auto" position only, and not when in the "Free" mode. Tires (original specification)are in good shape and not worn. Additionally, to overcome this aggravation, I've been driving in the "Free" mode most of the time. Am I causing any transmission damage by doing this?