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I'll try the same thing maybe using ATF. I just came inside from playing in some loose dirt, front axle was a no joy. Could hear the thunk going into reverse and when I would go back to first and tried to move I could hear a thunk in the transfer case but no positive engagement in the front...

I was wonder about the air selector switch myself. I wasn't sure if I should hear the air shift only when I go from neutral to reverse and back, or if I would also hear the air shift going from neutral to first. Wasn't sure if I needed to tear into it, but it sounds like it's working normal.