If it binds up and tries to stall the engine but throwing it in neutral ends that, it almost has to be something broken in the transfer case. I'm assuming the front driveshaft is still removed and the RF wheel isn't locking up.

If the wheel is still locking up, I would inspect the brakes for missing bolts that would let the caliper swing out against the rim. Then check the wheel bearings, axle shaft u-joints, pull the CAD and see how things look, and pull the cover to inspect the gears.

I actually would inspect all of this and the driveshaft, even if the tcase is bad.

 

Been kinda caught up with work, but today I drained the fluid from the transfer case and there are some tiny, shiny flecks floating in it, but they are not attracted to a magnet. Could they be aluminum? There are not many flecks. But they are noticeable.

 

Probably aluminum from the case.......

 

should I just go ahead and replace the t case? I've been looking, but no-one local seems to have a used one. Might have to order one online.

 

Are you sure it's the problem??? If you are, then yeah, replace it. Or, rebuild it. Not too bad of a job, if you have a warm place to work......

 

Found a t case for a good price so I went ahead and replaced it, but it's still doing the same thing. I was thinking, since the truck will stop jerking and trying to stall when I put it in neutral, could the rear end be locking up?

 

You aren't using 4x4 on high traction surfaces by any chance are you? (major No-No.)

 

No. Only on dirt.

 

I opened the rear end just for the hell of it. Nothing looks damaged. The fluid seems very thin and burned looking. The two smaller gears in the center seem to wiggle around a good bit, but i see no signs of anything locking up. However there Is about 1/8 of an inch of debris on the magnet. That seems rather excessive to me.

 

Do you have LSD? (posi rear end.)