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Hi-
When I switch the mode from A4WD to 4-HI, the light blinks between the two and continues to do so, but when i switch to 4-LO it stays solid, same with A4WD. Is this normal?
Thanks
No, it is not normal for the lights to blink, alternating or otherwise. This could indicate dirty contacts down on the shift motor mounted to the back of the transfer case.
My other question is that the fuel guage seems really sensitive to incline, even when basically full- is it normal for the indicated level to fluctuate so?
Yes, replacing the tank is the only solution. Also, if you might want to consider changing the fuel pump assembly at the same time. I know it's more money, but it will save you the trouble of dropping the tank again.