I redid the 241 HD in my 94 cummins I bought this fall, it was doing the same thing. I had to put a shift fork in it that controls the 2 hi to netural, to 4 low. It was really easy. I did it in the truck, only took half of it apart. My chain was good and all the bearings were fine, so I only needed the shift fork. I guess they wear out from not enough lube in them, as the tail shaft moves in and out and it takes a little lube each time, after a 100 thousand it is down a bit and this range lever is high and dry. I did the whole thing in two hours tops, and I have never worked on a transfer case before in my life.
I just started by taking the driveshafts off, then the rear driveshaft tail housing comes off and then there is some snap rings and then another housing comes off. Then the front shaft hub is taken off and then you split the case. That whole deal was maybe a half hour. I cleaned everything up good and that took the longest, along with checking everything out. Went to the dealer and they had the range fork in stock, went back and stuck that on, kind of a tricky deal as it is a tight fit and I didnt want to break those little plastic tabs.
What mine would do was go into 4 low, and I couldnt get it out, I bought the truck that way. The guy sold it to the junkyard and I snagged it, glad I did, it is a good running cummins. He was told the transfer case was junk. I looked up all the parts for price wise, and it isnt all that bad to put a new chain and new bearings, but all mine were fine luckily, so I didnt need em.
Maybe the area that the those plastic teeth rid on was chewed up and it took them out again.
