I just joined this forum today, I tried the search but did not find what I was looking for.

I have a 96 cherokee 4x4, the transfer case is shaking and hitting the skid plate the one that runs at a 45 degree angle off of the main cross member? It does this when idleing and in gear.

I took a bar and raised it enough to get a peice of heavy gauge mud flap from a truck under it. It has stopped the noise for now.

Is their a better way to fix this? I thought about removing the three bolts from the skid plate and getting some longer ones where I could use washers to lower the plate just a little. Is the transfer case suppose to sit on this skid plate or be off of it a little bit.

 

I could be wrong but sounds like you got a bad mount somewhere possibly

 

Have a look at your transmission mount. Yours is probably in need of replacement.
The solution you did with the rubber in between will appear cosmetically ok fro now, but lowering the skidplate will just give more room for the TC to drop down further in the future.
Its a common thing on the Xj's your age, mine is the same and needs the transmission mount (and engine mounts) replaced, to lift the TC back up and away from the skidplate.
There's a right up I think on replacing the transmission mount, the mount itslef is not too expensive for you guys in the US (here in OZ everything on Jeeps is expensive

 

Sounds like your transmission mount is shot.
Replace it and replace the motor mounts as well.

 

Bingo!! That's a good place to start for sure.