If you've got posi-lock to engage the front axle, you don't need any of the vacuum lines that go to the transfer case. Back to the original issue... Someone really had to be creative in order to overfill it. When you're filling it using the fill plug hole, and the fluid level reaches the bottom of the hole, the fluid runs out and makes a mess. You put the plug back in and you're done. Just a guess here but, the vacuum switch probably was leaking, it sucked transmission fluid into the transfer case which raised the fluid level. Then you installed the posi-lock and left the fluid level alone.

This might help you with the vacuum lines for the transfer case. If you need a diagram for the HVAC lines, let me know:

 

When I fill the front axle, the truck is on ramps and I have a habit of overfilling it. With the transfer case, I manage to do it with all four wheels on the ground. I don't go by the fluid capacities. I just keep pouring fluid in until it pours out and cap it.

How does it suck ATF into the transfer case? Are there other tubes going into the transfer case other than the lines? Are there other vents? If I can get under the truck again and find the vacuum switch, what would be the best course of action?

1. Leave it alone
2. Yank all of the vacuum lines off and leave the ends open
3. Yank all of the vacuum lines off and cap the ends with vacuum line caps
4. Replace the vacuum switch and all of the lines and reconnect it to engine vacuum

Thanks

 

Somewhere on the forum there's a thread showing the anatomy of the vacuum switch: showing how it works, what goes wrong, and the symptoms of a leaky switch.... Good article, but I can't find the thread

Inside the switch there's a brass spool valve with O rings on it that slides back and forth. When you select 4WD, linkage inside the transfer case operates the switch, the spool valve slides and connects manifold vacuum to the axle actuator to lock the right front outer axle to the inner axle. When 2WD is selected, the spool valve slides back and connects the axle actuator to atmosphere, (unlocking the axle) and plugs off manifold vacuum. What happens is the O rings leak and allow manifold vacuum to be applied inside the transfer case creating a negative pressure. Transmission fluid is sucked past the transfer case input shaft seal and overfills the case. The vacuum switch can also apply vacuum to the axle actuator while driving which can partially or fully engage the front axle shafts. Usually causes a buzzing or humming sound before it fully engages. Selecting 4WD usually stops the noise.

Once the fluid level reaches the switch, fluid is sucked into the vacuum line system which is shared with the HVAC system. When it gets into the HVAC lines, mode switch and vacuum actuators, air flow from the blower becomes difficult to control. When fluid gets to the axle actuator, you might not be able to shift in or out of 4WD. If/when all this happens, it's a time consuming mess to deal with. All lines and components need to be thoroughly cleaned out, or replaced, before they will work properly.

If you have the posi-lock system, and it works, yank all 3 vacuum lines off of the switch and plug them. Then adjust the fluid level.

 

I know this is REALLY late, still, it may help someone. Another cause for "extra" T - case fluid is the seal between the T - case and tranny. Check your trans level to see if it's dropping as well.
Good luck!