Ok so it was flipped, numb nuts put the lever on backwards. She now shifts just fine through all the gears.
But once you solve one problem you find another. I fired it up and with the transmission in neutral started shifting to 2H on the transfer case. There was a loud grinding noise until it went into the 2H slot. The back end of the truck was on jack stands and I could see there was power when I went into drive. I have a feeling the case is going to end up back on my work bench to fix this one.

 

Man, I know that feeling! Story of my life!

If you have time, I would pull it and do it now before it shells out on you! Glad you got the first part fixed!

 

I plan on it. The truck has turned into my back up. I really only need it when it snows or when I need to transport something big. Hope its an easy find, the truck has been sitting for about 4 months now and I would love to get it out on the road. She runs great for little over 240,000 miles on her and deserves better then hogging up space in my shop.

 

If the transfer case was also in neutral, you cant shift it to 2wd or 4wd without first shutting the truck off.

 

Even in neutral, with no load on it, trans parts will spin. That is why it was grinding trying to get the t-case back into gear. Normal. Don't worry about it.

 

Before I had to tear it apart to replace the pads and mode fork there was no grinding. It went smooth into all gears. The noise is defiantly not normal.

 

With the engine running and the TC in neutral?

 

So are you saying you can't change the transfer case without first shutting off the truck?

 

Only if the TC is in neutral. And if in 4hi for example and you want to go to 4 low, you have to rapidly shift it through neutral(don't stop in neutral. Slam it in to 4lo. Of course come to a stop before shifting into 4lo at all times.

 

ok so it looks like you where right. I knew about coming to a stop before shifting into 4L, I was told to put the transmission in neutral when doing so. Guess I never started the truck with the transfer case in neutral to hear the noise before. I started the truck with the transfer case in 2H and then shifted into 4H with no problem at all. Took it for a quick spin and was happy with the results. The only thing left to do is put the front drive shaft back on and probably give the interior a deep cleaning. Put away dirty in a cold shop for four months did a number on her.
Thanks for all the help everyone. Maybe if im feeling brave and find the time I will visit some snowed over forest service roads this weekend.