Recently purchased a 2002 S10 Blazer. The transfer case button on the dash has three normal selections but one extra that our 98 does not have. It is called Auto 4wd. We drive the 2002 in 2WD most of the time and it has on occasion had problems at stop signs of traffic lights. You give it gas to go and the car will move forward a foot or two and then the transfer case seems to disengage and then kick back in. It did this once in reverse too. It is only a fractional hesitation but you can definately feel the car not being propelled forward and then it kicks back in. Only does this from a stopped position. Never after you are driving down the road and only say once every 100 miles or so.
The Blazer has 90,000 miles on it and when we bought it I checked all the fluids. Rear end and transfer case were just a tad low and I refilled both. I added the correct Autotrak II fluid that you are supposed to use for this transfer case. I did notice that when I added the fluid the bolts on the transfer case had some wear on them indicating someone had been in there. We drive on pavement most all the time and only use the 4wd in winter if the roads are snow covered. I was thinking about driving it in the automatic 4wd position to see if it does something different. I assume it will not actually be in 4wd since it is summer now. Any ideas/thoughts?