I will try pushing it in Park next time I'm at the shop(later this week). I'm kinda liking the transfer case theory. Here's a bit of additional info: when fiddling with transfer case selector, I was able to get the 4WD light to come on. Seems strange to me. I thought forward motion was required(from the pulser) to illuminate the light. Thanks so much for all your help!!

1987 Raider
1991 Montero LS
Nipomo, CA