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your reduction fork is too worn or has snapped and cannot take the reduction gear out of low. xfer case needs to be rebuilt. Its not too difficult. get a new reduction fork, oil pump, oil pump hose and gasket for between the tranny and xfercase. Also need 3-4 qts of Mercon Tranny fliud and a decent set of tools.
That oil pump bracket wears through the ridge on the case regardless of whether you go off road or not. Personally, I think anyone that has a 1356 with over 100k on it ought to open the case and weld a extension on that piece, to keep it from wearing through. Save some money that way.
Rezvani's Latest Post-Apocalytic Monster Is a Ford F-150 Raptor Underneath
Slideshow: Called the Fortress, the 850-horsepower pickup combines Raptor underpinnings with military-inspired features, survival equipment, and a starting price of $285,000.