I'm not quite sure what you have but I think you may have a electric actuator if you have a button on the side of the lever. The easiest way to check is to see if you have a VSV controller in the engine bay. On my truck to see where the problem was I had the truck turned off and in 2wd. I then turned the front drive shaft by hand to make sure it turned. Then with the truck still off, I pulled the 4wd lever in the cab and the front drive shaft no longer rotated. That let me know the problem was not in the transfer case. Then I moved on to the front end. If you find out you have a vaccum actuator there is tons of testing to help narrow it down. You should need a voltmeter and a vaccum gun if it's vaccum opperated. I'm not too familiar with the electronic transfer but I learned tons about the front vaccum actuator. Here are some links for ya. Good Luck

http://www.4x4wire.com/toyota/tech/add/
http://www.junglecode.com/toyota/tacoma/2003_fsm/
http://techinfo.toyota.com/
http://www.toyotaworld.com/
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