I want to clean the engine compartment in my 04 150 4x4, I heard that there is a 4-wheel drive solinoid in there somewhere and to not get it wet. Where is the local of it and does it really need to stay dry?

 

Use a rag and simple green, I would not suggest using a pressure washer or any other source of water.
This way you are safe all the way around.

 

Watch the ignition coils, too. They don't like water either. You could end up with a misfire or even worse a multiple misfire that can damage you catalytic converters if it was bad enough. I've seen lots of guys have to put out big dollars for repairs all because they washed their engine. I use as little water as possible and remove any excess with compressed air. If you are careful you shouldn't have any problems. The solenoid you are looking for is mounted to the firewall on the passenger side. (behind the battery)