Hey, I had the totally erratic service 4wd flashing on the dash and itself switching between normal and diff lock etc...
It would just have a mind of its own and you could hear the solenoids shifting.

Here's what I did and it might be worth a shot for anyone else having this issue.

As I had already pulled the 4wd switch from the dash I unplugged it.
The problem totally disappeared. I think these switches aren't engineered properly for what they were built for.
I ended up getting another switch and no more problems at all.

So before diving into the transmission or wiring or solenoids, just check the 4wd stitch on the dash, try unplugging it first.