My truck was not moving. I had the truck completely stationary on a flat surface with my transmission in neutral (E4OD, for reference), and my foot on the brake. Also for reference, my truck has automatic hubs.

It only seemed to grind if I left the T-case in neutral, and then tried to shift to either 4-low or 4-high/2wd. If I shifted quickly from 2wd/4-high to 4-low without stopping, it would go in without protest. Same thing for leaving 4-low: if I did it quickly without stopping, it would either not grind at all or only make a tiny bit of noise. If I tried to leave T-case neutral with the trans in Park, it would make a VERY bad noise; I only attempted this once, and it was when I was still trying to be gentle, so I don't know if it would have still made the noise if I shifted it quickly.

It doesn't make sense to me why it would be grinding if my transmission is neutral. If I leave my T-case in 2wd and put the transmission in neutral, the truck doesn't move an inch, even if I give it some gas. I distinctly felt gears grinding when I was trying to leave T-case neutral / 4-low though, I could practically count the teeth on the gears.

Maybe this is related. I had no problems switching from 2wd to 4-high while moving or stationary. On a few occasions though, I would shift it from 4-high to 2wd but the truck seemed to stay in 4-high. I don't know if the front driveshaft was turning, but I could feel my front wheels binding up when I was doing low-speed sharp turns. It didn't do this every time, and it seemed to go away after I reversed the truck to unlock the hubs, but I don't know if sticky hubs would cause that.

 

Well I'm pretty much stumped on that then. But both of the 4x4 trucks I've driven were stick shifts so I can't say I know much about how the automatics work. If I have the truck rolling a bit and I shift through neutral I can feel a little bit of grinding, but again, thats because its rolling (slowly). I usually try to stop before going back forth between low.

That is normal. Automatic hubs use some other mechanism to lock and unlock (vacuum maybe?) and don't necessarily unlock until you reverse direction for about 10 feet. According to the manual, you have to stop the vehicle, shift into 4-high, then you're good to go. After doing that, you can shift back and forth from 2wd to 4-high at any speed, as long as you're still going forward.

Some slight binding while steering is normal when the front axle is locked in. But you may want to look at the condition of the u-joints in the knuckles to see if they need greasing or replacement.

 

Here's something else for the mix, when my '85 had the 6.9 and T19 the 4x4 shifter shaked and rattled. Very annoying. When I put the 7.3 and ZF in, it stopped. Even though I used the same old T-case and shifter.