There are basically only two problems with the sprag-type transfer case - both involving laziness. Failures can be caused by the operator failing to follow the instructions in the manual, which emphasis the shift lever MUST be moved through first or reverse when changing directions (that is, you can pull away in second after backing up, but you must move the shift lever through first beforehand) - and you should never allow the truck to roll in the direction opposite that selected in the transmission. (don't sit at an uphill traffic stop with the tranny in first and let the truck roll back with the clutch depressed.
The other laziness is not checking the linkage adjustment once a year or so - I do mine when I do the clutch and brake maintenance.
Being basically lazy - I wouldn't swap the transfer case to air-shift, or install the reb kit, if the parts were free (in fact, I have spares, and won't go to the effort). I've got trucks of both types, and have never had to any transfer repair - and my trucks have been driven a LOT.
HTH,
David Doyle
