I'm stumped. Probably going to have to bite the bullet and take it to a shop, but wanted to throw this out there in case it's something common and easy to fix.

Around 90k miles on the truck. Had the front dif serviced last year, other than that, I dont think its had any work done to the 4x4 system.
The other day was on hwy, everything smooth as butter. Exited, stopped at light, went to turn left from a stop, slow acceleration and this god awful grinding noise came about and went away when I let off the gas. Then a little bit when I accelerated, then went away. It sounds similar to when you engage the starter and the engine is already running, like the starter gear hitting the flywheel. only it's a deeper tone and louder (I tapped the ignition while running to see if that was the culprit, and it's very similar, but different)
I pulled the 4x4 actuator to see if maybe its losing vacuum and engaging slightly when it shouldn't be and all seemed perfect. The splines weren't even scraped up or anything.
Tested out 4x4 and while it does engage perfectly, it grinds like crazy and is choppy when attempting to turn in 4x4.

Could the front u-joints, CV axles be the noise??

The tranny still seems smooth as can be, but I still fear it's the torque converter somehow as I've heard that is an issue with these trucks.
Any help is greatly appreciated!

 

What kind of surface were you on when testing the 4x4? Have a look at the u-joints on the outer ends of the front axle. What kind of shape are they in? How's the fluid level??

 

Smooth concrete when testing 4x4. Fluid levels good and when some came out when I inspected the actuator, the fluid was clean as well.
With the wheels on I inspected what I could of the u-joints and they seem to be in good shape. There's no knocking and no play in either front wheel.
When I test drove it again yesterday, it seemed as though it needed to be up to running temp for the grinding to start intermittently happening. Coincidental maybe, but thought worth mentioning.

 

Yeah, 4x4 on a high traction surface WILL give you the bounceys.

Are you sure the noise is coming from the front end??

 

Front area, maybe close to firewall. Definitely not coming from rear.

 

Check the snap ring on the output shaft of the transfer case. They had a problem popping out of the groove or breaking. the output shaft slides ahead and destroys the transfer case. You need to remove the driveshaft and tail housing to check it. You can install a https://www.ebay.com/itm/New-Gillys-...-/283351373168

 

Ah! Haven't thought of that. Will check it out. Thank you!!

 

If it just popped out of the groove it's hard to tell. Look closely.

 

Yup! The ring was toast!

So, I'm figuring the best thing to do is open the case to inspect the internals? Not sure what damage can be caused from that ring being broke and causing the grind...at least I'm hoping that was causing the grinding.

 

The ring being gone allows the shaft/gears to walk back and forth in the case. That is, as you would guess, really not good for it. Be glad you caught it before the whole thing blew up. Might try just draining the fluid, and see how much crap comes out, and if you get any chunky stuff. Also are going to want to pick up on a transfer case saver. (just google it.) It replaces the snap ring with a collar, that isn't quite so easy to convince to abandon the shaft.