So we finally got around to looking at the case to see why the truck is stuck in 4 wheel drive.

We think the transfer case is bad or at the very least, the seal is leaking fluid into the transmission.

We disconnected the TCCM on the passenger side, all the lights went off the 3 button 4 wheel drive push button.

We then disconnected something from the transfer case itself, forget the name but the is a connection that is held in plan by a single bolt. Once that is removed the lights go off on the 3 button 4 wheel drive push button.

When everything is connected and truck turned on, when you press the 2 HI you hear a clicking on the passenger side, I assume it's coming from the TCCM.

We then removed the drive shaft to check a few more things. With the truck turned off we can turn the drive shaft, when the truck is on we can't turn the drive shaft. So I assume the vacuum is working correctly, maybe just to an extent.

So with all that said, is it the TC?

I do know for sure that the TC is leaking fluid into the transmission as the level is higher than it should be.

 

The 3 button takes ATF for fluid, you can remove the top check plug to check the level or let any extra out. Also with the truck off check the actuator under the battery. It should be out and puffy not sucked in or hard, make sure the cable isn't stuck in place, you should be able to move the cable back and forth. It runs down to the front diff and controls the locking of the diff. Worst case you can plug the vac line and have a 2wd truck. If the cable is bad replacing it isn't that bad either.

 

We were able to move the cable under the battery with no problem. I forgot to mention that this was checked as well.

 

Does this sound like the transfer case is bad or the actuator/encoder motor itself?

 

It could be the encoder motor pooping out, my trailblazer did the same thing your describing. Driving it was interesting to say the least.