Disconnected the air hose again and drove for a couple of yard including both hand turns and reverse, I discovered that 4H does get engaged while in D but looks like rear diff being locked sometimes prevents it from doing so.
Locker switch ONLY engages when in 4HLC/4LLC while in Parking or Neutral, and everything was working good until I trying messing with the locker today as mentioned in original post. I am assuming no electrical issue but a stuck locker??? is it possible that the actuator is not coming back to its normal none compressed stage? would applying some sort of vacuum help it decompress?