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It should be vacuum controlled, so you probably have a leak on the vac feed to the controls. Look under the hood at the passenger side of the firewall- there should be a small black vac hose passing into the firewall, this is the vac source for the controls. Trace it back to the source and check for breaks, worn out/cracking boots, etc. If you don't find anything under the hood, you may want to be prepared to tear into the dash. However, you may also want to wait until someone more knowledgeable about the F350's chimes in as well.
Yeah, it's vacuum operated, and with no vacuum it will go to the defrost setting. Vacuum also operates the cruise control and the brake booster. How are those working?
If those are fine, I'd be looking for a bad vac line connection. I'm not sure on the 91s, but on my 93 IDI, vacuum comes from the pump, to a block on the drivers' side inner fender, with a line that goes to the top of the firewall & over to the air box on the pass side. If that one is disconnected anywhere, you're stuck on defrost...
It looks like the previous owner had some kind of vacuum problem and freaked out. I followed the line from the pump to a piece up on the top of the firewall. From there it branches of 4 or 5 different ways. There is a small narrow line that has been cut and I can tell it goes to (at least what I'm pretty sure) is the air box on the passenger side that you mentioned. There is also another line that is only about 5 inches long that the previous owner plugged up with a bolt, and I'm not sure what It's purpose is/was.
But Id say that small line that was cut is probably what is causing my problems.