I recently completed a 3 inch suspension lift complete with 31" MT new brakes, rotors and drums, exhaust replacement from header, front wheel bearings, ball joints, drop pitman arm, steering componets, sway bar disconnects finished off with rock rails and front skid plate. Fron, rear diff's oil change and NP231 transfer case oil change. Issue 1( transfer case oil drained was around 4-6 oz of the 34oz requirement. All this was to address a knocking sound that felt driveline dependent on acceleration. After rebuild the noise is still present and after parking noticed the entire clean underside covered in transmission fluid which appeared to be coming from oil slinger.
Question 1). is the NP231 Transfer case the most probable culpert at this point? My thinking with the transfer case oil level so low that maybe a bearing in NP231 is shot. Could the transmission torque converter possible? vehicle has 175K on it of which the first 100K were strickly highway miles wth regular scheduled maintenance. After that my two kids learned to drive with minor mishaps. Looking to rebuild NP 231 and install SYE thinking this may address the main drive line bearing and seal issues. if in fact they have failed.

 

it could be the culprit, but only way to be sure is to discover the source of the leak. Clean the underside, and then immediately drive a half mile or mile, and lay under with a light and inspect.

 

Found two issues, first the output shaft seal was torn which allowed transfer oil to leak out. I believe this was the original problem which led to a premature failure of the inter output shaft bearing retainer ring. Upon removel of the shaft seal I found the broken ring in the housing. The remainder was still on the shaft but was not in the race way. Diagnosing this problem, once drive shaft isremoved, showed lateral movement of shaft in driveline direction like upto a 1/2 inch. So of course one could stop here but I have already order a SYE and Tom Woods drive shaft. Further tear down identified shift pads had extreme wear so these will be replaced along with front yoke seal as it is perfect time to replace before a premature failure. Once I reinstall I will update. The thumbing noise on acceleration was a result of the broken retainer ring.