The transfer case may be shifting, but that shift thing-a-ma-bob on the front axle also has to shift into place. It's a vacuum actuated device on the front of the axle to the right of the hogs head, just about center of the axle. It has a protective plastic shield over it with two vacuum lines running to it. If you look under the cover you can see the actuation arm. With the truck running so you have vacuum, have someone switch in and out of 4WD while you watch to see if that thing is engaging. Just an idea.