You have the:
Transmission with it's own gears and lube and shifter, and it is identical to the 2wd version of the same tranny except the adapter housing is swapped for the tailshaft housing.

Transfer case with it's own gear train. The gears you see are for 4wd lo range gear reduction. WHen you shift into 4wd hi, the shifter fork locks the fwd chain drive to the output shaft, driving the chain and the front driveshaft, enabling 4wd. When you shift further into 4wd lo, you unlock the tcase input shaft from the output shaft, disabling the 1:1 ratio, and lock the reduction input gear to the input shaft, sending the torque thru the reduction geartrain enabling 4wdlo range operation. These gears have zero effect on the tranny gears, except that if you have excessive drag in the bearings of the tcase, it will make shifting hard and crunchy in the tranny.

If the gears you saw in the tcase are torn up, the tcase has to be rebuilt or replaced in any case. After you do that, you can more precisely assess the transmission problems if any.