Whining/grinding; won't move in 2wd

[Natesgtojudge]

'98 XJ 198k miles 4.0/auto/242

Out of the blue, while driving, what started as a whine began happening. This lasted for about 5 or 6 miles and seemed to only happen on deceleration. When applying the throttle/accelerating the noise seemed to disappear completely and all was normal. After those 5 or 6 miles it was as if I lost all power to the rear wheels. Engine revved, but nothing happened. Coasted into a parking lot and realized when I went to push the thing out of the way and into a parking space that even in park the Jeep would still roll freely. Messed around with the transfer case shifter a bit and discovered in 4wd high the noise went away and I was able to get the thing home. When I went under there I discovered the transfer case linkage was in bad shape, as I've read is common. Rusty, missing bushing causing a lot of play, etc. I have removed the stock linkage, manually put the transfer case into 2wd via the lever on the transfer case itself, and changed the transfer case fluid. The fluid was low and dark. Who knows when it was last changed. All seemed fine and I attributed the initial issue to the rusty linkage and/or low fluid in the XC. Went for a test drive in the neighborhood, staying close just in case. Made it roughly 2 miles before the noise started again, this time louder and immediately lost all power to the rear wheels. Again went under there and manually put it into 4wd and made it home, which is where things stand now.

I'm fairly mechanically inclined, but this is my first 4x4 vehicle as well as Jeep so I'm at a bit of a loss now as far as where to go to diagnose this issue and get it back to daily driver duty. Owned it for just over 2 years now and put 27k miles on it up to this point and she had been dead nuts reliable up until this.

 

[Tim_MN]

Once you disconnect the shift lever and worn out shift mechanism, the mode lever on the side of the transfer case either shifts the t-case properly, or it does not. You should be able to shift into all the drive modes from the mode lever.

 

[Natesgtojudge]

Once you disconnect the shift lever and worn out shift mechanism, the mode lever on the side of the transfer case either shifts the t-case properly, or it does not. You should be able to shift into all the drive modes from the mode lever

Correct. I am able to physically move that lever and it "clicks" into all 5 positions, but the problem is when the transfer case is in 2wd that is when the god awful noise occurs and the vehicle won't move anywhere. In any of the 4wd positions it seemed to work normally, at least enough so to get itself home.

 

[Tim_MN]

The 242 is well known to be stubborn shifting into 2wd. Is it just not shifting into 2wd?

A worn and loose transfer case chain usually makes noises. Worn shift fork tabs or shift fork damage usually leads to shifting issues.

You may have to crack it open and see if anything inside looks nasty.

 

[Natesgtojudge]

The 242 is well known to be stubborn shifting into 2wd. Is it just not shifting into 2wd?

A worn and loose transfer case chain usually makes noises. Worn shift fork tabs or shift fork damage usually leads to shifting issues.

You may have to crack it open and see if anything inside looks nas

The lever on the transfer case itself is as far up and forward as it seems to go. I should've added in the initial post I hadn't used 4wd at all for over a year. This just happened completely out of the blue while driving in 2wd.

When I changed the transfer case fluid I was able to poke in there and feel the chain. Its definitely tight with no slack to speak of. The noise started almost like a starter whine and quickly progressed to now what is a fairly loud grind almost as if while in 2wd its internally between 2 settings?

 

[Natesgtojudge]

Today I got all 4 wheels in the air on jackstands and was spinning both driveshafts by hand to see if everything is free. The noise is coming from the tail housing on the transfer case where the rear driveshaft meets the transfer case. Any ideas?