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2nd Gen Ram Tech1994-2001 Rams: This section is for TECHNICAL discussions only, that involve the 1994 through 2001 Rams. For any non-tech discussions, please direct your attention to the "General discussion/NON-tech" sub sections.
N is neutral, it disengages the t-case from the trans. (or, alternatively, the trans from the rest of the driveline.) I do believe that front and rear axles are still locked together though...... so, you can't simply drop the t-case into neutral and flat-tow the truck. (I think, not 100% sure on that.....)
2hi only uses the rear driveline to move the truck. Front is completely disengaged. No power is transmitted to the front driveshaft.
It shouldn't move at all in neutral...... the trans should be disengaged from the rest of the driveline....... I would be tempted to check the tag on your t-case, and see what year it was made.... shift patterns changed in 98, it's entirely possible that neutral on yours, really isn't.