Ah, so that must be why it leaked--no lube and the seals fried. I was wondering about that. So if I'm reading you right, by towing with the transfer case not in neutral (or even if it was) with the front wheels up but the rears rolling, then only one side of the viscous converter was turning. Man, wouldn't the towing vehicle notice? That sounds like a lot of friction. Obviously they didn't, but I guess what this means is that even though on the bench, the transfer case seems all right, it probably isn't.

 

When the tcase is in neutral it doesn't matter if the front is lifted up or not. The drivetrain is disconnected from everything. Just like the driveshafts were taken off. The only thing spinning is the rear and front output shafts and these are lubed by the fluid in the tcase.

 

this has a 249 t-case, not a 231 or 242.
you can't remove the front shaft on a 249, the t-case will think the front wheels are slipping and the viscous coupler will burn out. the viscous coupler is like a differential with spider gears. they will be screaming.

but don't take my word for it, google it.

 

Actually you can take the front drive shaft off the 96-98 np249s with no ill effects. The 93-95s are the ones not to take the front ds off.

 

yup, guess you're right. forgot bout that.