Tranfer Case chain
The lack of reverse and extreme noise when in reverse is cause by the rang hub not engaging completely into the planetary gearset. The cause of this is worn plastic spacers on the range fork. Quite possible the range hub has worn into the fork itself requiring the replacement of the fork and hub.
The primary cause of the failure is a known problem with these transfer cases and revolves around the oil pump. The oil pump is mounted on the main shaft and pumps oil to the friction areas through the shaft. the only thing that keeps the oil pump from spinning freely on the shaft is an oil pump arm in between two raised lugs on the inside of the case. The oil pump arm is made of steel and the case is made of magnesium...over time the arm will wear through the lugs and cause the oilpump to spin, breaking the oil pickup tube.
Once the pump no longer has oil to pump, the hub quickly wears through the plastic spacers of the range fork giving the hub "play" which causes it to not engage in reverse because the teeth on the range hub are such that they will grab in one direction and slip in another with the same amount of play (like this.....|\ |\ |\ |\ |\ )
So... as stated above check the fluid in the case...very likely it'll look like liquid silver...then you'll know for sure that it needs a rebuild.
It would be very difficult to service the TC while still mounted to the tranny and you really want to be able to clean out all the magnesium and steel bits so further wear doesn't occur once you've rebuilt the unit.
Check out these
sites:
http://www.technicalevolution.com/borg1356.htm
http://www.wildercafe.com/fordtech/
threads:
https://www.ford-trucks.com/forums/s...d.php?t=302161
https://www.ford-trucks.com/forums/s...ighlight=1356+
https://www.ford-trucks.com/forums/s...ighlight=1356+
https://www.ford-trucks.com/forums/s...ighlight=1356+
https://www.ford-trucks.com/forums/s...ighlight=1356+
Good luck and let us know if you need help...also check my gallery for some tc pics.
A better option will probably be to rebuild your own...this guy on ebay sells entire kits for these for 100-130 dollars. I wish I had seen this before rebuilt mine as I spent that much on just a hub, fork and gasket. The kit includes the transmission to TC gasket, the range fork, the range hub, a new oil pump, and a seal kit.
Here is an example of his auction, but for future viewers he can usually be found by typing in 1356 borg warner: http://cgi.ebay.com/ws/eBayISAPI.dll...sPageName=WDVW
The advantage to rebuilding vs buying a used one is that you don't know how close the used one is to falling victim to the same fate...which it will do eventually (design flaw)...also it will most likely be cheaper to rebuild.
Let us know what you decide to do.
check these out for better distinction:
http://www.drivetrain.com/transferca...onco Full Size
http://www.drivetrain.com/bw1345transfercasesillust.htm
http://www.drivetrain.com/bw1356transfercasesillust.htm



