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The transfer case parts diagram shows a valve body and an electric solenoid 29507452. I can't quite tell if it goes to the tcase electrical connector but it appears so. Has to be some type of electrical control that opens a fluid valve or alike when mode is engaged.

I thought the electrical connector on the transfer case was electric actuation for the transfer case diff lock. I could be wrong though.

The transfer case swap is a big job.

Clutch packs. Probably a bad transfer case then. Your local allison dealer can make a definitive diagnosis. If you can get the trucks free thru the gov agency giveaway program just get another one and use one for parts.

In my experience just about anything will throw a code. If you put it in normal drive and the system cannot apply any power to the front axle it will usually not go anywhere. You have to put it in mode in a front loss of traction situation. So its weird that the truck drives when not in mode if...

If it shifts thru the gears chances are the shift module is ok. More likely a transfer case issue with your symptoms.

See if you have 4x4 in low range then

Yes thats supposed to happen. If you put it in mode then in drive, press arrow down until 1 1 is displayed then you will be in low range. Its a very low gear. See if it works.

I know the wtec3 does an "impedance sense" of the solenoid coils across the wire harness. Not sure if the wtec2 does as much. Does the truck go into low range and drive like that?

Are there any error codes stored?

Learn something new every day. Number 7 in the pic. If you have metal and bearing parts caught in the filter I think your transmission is on borrowed time though.

Does the trans still have a low voltage error. If so clear it. See if it comes back. Take a digital multimeter at the posts left side of the power panel and measure the 12 and 24 volts with the truck running and see what they actually are. Low voltage will cause all kinds of issues.

Could be a harness issue. Make sure the 2 plugs on the back of the ecu are in all the way they like to slip out. I think the tm has some troubleshooting for similar issues.

Ground the ecu housing. It's only grounded thru the dash plate.

Arrow up and arrow down at the same time. There is an allison guide online that tells all. A visual inspection of the trans harness and connection couldnt hurt.

There is a connector on the transfer case, part of the transmission wire harness, that controls lock and unlock on the center diff. When you are not in mode and the rear is slipping you may not see power to the front and this can be normal.

Front shaft does not turn at all? In mode? The trans keypad can display error codes see if there is anything stored.