4x4 lights just blinking, tried it in lo and it felt like it engaged but didn't. is this the encoder and if so which 1, do hear the tccm clicking

 

If its anything like my 2000 blazer you have a vacuum problem.

When you push the 4wd button it flips a switch which allows the vacuum to pull on a vacuum pod, which engages the front wheel axle. You can find some stuff on the forums about it, thats where I did.

Heres a google search of the forum for the vacuum actuator. Which is the pod that engages the axle. You should be able to find something.
http://www.google.com/search?q=4.3+b...0f73886609171d

Let me know if you need some pictures.