My jeep has been making an odd noise similar to tire rub, but it isn't. Further inspection shows that the tcase is covered in fluid and it seems to have sprayed up onto the underside of the body. Does anyone know what this could be and if the two problems (noise and wet tcase) are related ?

 

There could be a couple things but only one that would make a rubbing noise and cover the bottom with ATF. A stretched chain in the t-case wore a hole in the case making a hole for fluid to get out and the chain slinging it out. I've heard of this happening a few times.

Any other ideas?

 

It's manual, so could it be the same thing? Just with gear oil instead of ATF ? And that would explain the noise?

 

Any rotating part that should be lubricated but isn't will probably start singing.
I'd start by cleaning all that crud off with a good degreaser, filling the transmission and transfer case to spec and then watching carefully to identify the leak source.

 

Would that explain the sound?

 

The transfer case is lubricated with ATF whether you have a manual or auto. They are seperate components and do not share fluid.
I would clean everything really well and check/fill the oil in the transfer case. Then drive it for a while and see if you can see where the leak is.
I 2nd a really good look for a hole in the case from the chain rubbing.

 

Ahh, that would explain why I can't smell the fluid, and when I rub my fingers on the fluid a decent amount of metal shavings and small chips are on my fingers. How bad is it to drive like this, and would that explain the noise?

 

It would explain the noise and it is bad to drive it like this.

The case could self-destruct and leave you standed somewhere.

 

Yes, bad, and yes

 

Oh geez then I better find a temp ride from a family member, what is suggested, to go but another np231 from the junkyard and refurb it? Or to pull mine apart and see what can be done? Also my jeep has the ax-15 and all the xj's in the yard I'm thinking of have the ax-4, does this matter or as long as it has the np231 I'm good?