Your AUTO hubs have failed. Possibly a vacuum leak.

Basically the hubs connect the front axle to the wheels.

Basically the transfer case connects the transmission to the front drive shaft.

Having the hubs in MANUAL/LOCK position does not determine the truck is actually in 4x4 mode. For the truck to be in 4x4 mode, 2 things must occur: the hubs must be locked in and the transfer case must be engaged. If one of these 2 does not occur, then the 4x4 system does not work. Since your hubs are now manually locked in, the dash switch determines the mode of 4x4 or 4x2. This part is normal.

For more info read my article titled 'The Basics of ESOF':
https://www.ford-trucks.com/forums/5...ml#post4027310