the np242 transfer case (which you have) is a P.I.T.A. with disengaging. everytime i go from 4wd to 2wd i wait till the light goes off for a solid couple of minutes just to be safe.
one time i put in the 2wd after wheeling to get on the freeway and it ended up kicking back in and that was bad on the freeway.
IMO id give it time to sense its good for 2wd.

 

when trying to shift out of 4wd you can put the trans in nutral.
first come to a stop
put trans in N
shif transfercase to 2wd
put trans in R
back up ten feet
shift trans slowly to N and then D
drive forward ten feet
if light is not out then start over and give the transfercase shifter a little wiggle and push
when backing up make sure you go strate back not turning

If you do this for a half hour and still nothing then check your linkage.

 

30 minutes? It takes less than 5 to check the linkage, why wouldn't you start there?

BTW I just had my first run in with this issue in my 04 WJ same TC. Unfortunatly its raining violently outside and I have no garage. So I guess I know what I'll be doing for the next 30 minutes lol.

 

These transfer cases were made to be shifted from 2wd high to 4wd high and back again while the trans is in gear, moving in a straight line at speed. Let off the gas, pull the lever, tap the gas and let off again.

 

I am posting this because I had a hard time figuring out why my jeep would not go into 2 wd drive , but I saw a YouTube video that helped me, under the truck loosen the lineage bar that has a 10 mm bolt and the stick it into 4wd lo, then tighten bolt , it should go into 2wd drive, adjust according to get all options. It works. Trouble shooter for a long time.

 

Linkage adjustment isn't the usual issue with these transfer cases, it's a combination of user error and a finicky system. If you do it right, as Cruiser stated which I think is also the 'book' way, they generally shift fine. I think the problem is that people think the shifter should just make the case do what the lever indicates and that's not how these work.

This may not be mechanically accurate, but it's basically what happens in these T-cases. Think of the lever as being connected to the gears by a spring rather than a hard connections. When you select 2hi the spring is trying to move the gears but they're under pressure from the engine driving them as well as any tension created by differential speeds between the front & rear outputs. You need to remove the pressure from the gears so that they'll release & shift. So driving in a straight line will release differential pressure and pushing the gas on/off will release the engine driving pressure and they'll shift. Sometimes they'll shift without doing anything, other times they'll be more persistently stuck. I've had a few occasions where I thought it was broken then it suddenly shifted without doing anything special, it just has to be finessed a bit. While I do dislike not having direct command over the shifts that many cases offer, I really like the 'full time' option. Another upside to having this case as OE equipment is that you have no front axle disconnect and bigger U-joints in the axles….AFAIK anyway.

Mine will almost always shift right into 'part time high' instantly, full time and 2wd selections may be delayed.

 

Is there anyway you could post a link to that YouTube video ?