I'm still whittling it down, here's where I'm at:

1. I pulled the rear driveshaft and checked the clip ring in the transfer case and u-joints. All fine
2. I checked the fluid level in the transfer case, it was low, so I added about 2/3's of a quart. Noise still there.
3. Right front wheel bearing replaced (this was what I originally thought the problem was)
4. Noise only happens in 2wd. I can make it go away by pulling back on the shifter, but not quite putting it into 4wd.
5. I pulled the front drive shaft and drove the truck - noise still there
6. I pulled the CAD. The only thing obviously wrong with it was the vent pipe was broken, but that shouldn't affect operation. However, the wheel side axle has more play in it than I think it should. It doesn't really center in the axle coming from the differential. I can move it up/down/side to side about 1/8", and the gear that engages 4wd won't slide over it unless I move it up. Is this normal? What is supposed to keep these two shafts lined up? It's possible that this shaft is wobbling in whatever is supposed to keep it in place

 

I think there is supposed to be a bushing between the two axles, one has a nub, the other had a hole. There *might* be a bushing on the nub. If not, one or the other is worn.

 

You've stated under #4 that the noise goes away when you move the shifter. Have you had a chance to remove the two bolts that hold the 4WD shifter to the transfer case and inspect the 4WD shifter? On my '96 Ram, I had the exact same issue and it was the plastic detent on top of the shifter being out of position that allowed the shifter to flop around and not be in proper position for each gear. Also, what year is your truck?

 

Yes, I meant to add that I have inspected the shifter and it looks good

 

Yup, I think my intermediate shaft is toast. There's supposed to be a small shaft that inserts into the outer shaft, and it's either worn or completely gone. I'll get further into it today and report back

 

According to the parts diagram, the intermediate shaft bushing is a Dodge part number 5252686.

 

It is indeed this bushing, it's crumbled into pieces. The small shaft extension on the intermediate shaft is fine. This one was a tricky one to diagnose because I couldn't pinpoint exactly where it was coming from. It was 'somewhere from the transfer case forward'. After eliminating the the u-joints and the ring clip on the transfer case, the next clue was that shifting into 4wd would make it stop. I still thought it could be a gear or the chain in the transfer case, so pulling the front driveshaft and noticing that the problem didn't change was another clue. I didn't check my CAD sooner because it works, even if it's sluggish sometimes. Now the sluggishness makes sense. In tracking a problem like this down I'd suggest ruling out the CAD and associated components sooner.

Anyway, my outer axle is toast, but they're not expensive, but I also get to replace the inner shaft seal. Yay, new tools. I think I'm going to install a Posi-Lok while I'm in there. I love this truck, it's a short bed, short cab with the big V-8, 4:10 gears, and a locking rear end - the damn thing is like a big Jeep

 

Actually it's going to be a little more involved than that. The intermediate shaft is too worn to put back, so it's going to be intermediate shaft, outer shaft, shaft u joint, bushings, and seal. My guess is that the seal failed, let lube drain below the bushing and then the bushing failed. I drove it long enough for the vibration to wear out the intermediate shaft where the bushing should have been. The moral of this story is diagnose your vibrations before they take out other stuff

 

So basically the front axle grenaded? But 4wd still worked??

I would love to see a picture or diagram of what happened. I can't understand what bushing you're talking about.

 

I wouldn't say it blew up, more like just wore out. I think what happened is the CAD had an oil leak which allowed the oil to drop below the bushing, which ran dry. The bushing between the intermediate shaft and the outer shaft then wore out and fell apart. This allowed the outer shaft to wobble around the intermediate shaft creating a grinding noise, and wearing both shafts excessively at the bushing area. It also took out the oil seal. I'm really surprised that 4WD still worked, but it did, it was just a little wonky.

It's also possible that it all just wore out, the truck has 280,000 on the clock. If I was cheap I'd just replace the bushing and the seal and it would probably work, but I intend to keep the truck for the long haul, so I'm going to rebuild that side.

Pics: The first pic is the end of the outer shaft with a hole to receive the bushing. The second pic is the bushing between the intermediate shaft and the outer shaft, and the third pic is the intermediate shaft with the smaller shaft at the end that goes into the bushing.