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When I bought my '79 F150 4x4, the previous owner had removed the front drive shaft and told me it was because he thought it would improve gas mileage. The truck is a fulltime 4x4. I wasn't familiar with the 203, at all; didn't understand the shift pattern, etc. Now I know that when I test drove it, I was running in the 4 HI Loc position. When the transfer case was in 4 HI, I could start from a parked position, but as soon as I took my foot off of the pedal, it would seem to come out of gear (if you will). In other words, if I tried to accelerate after letting off of the gas, it wouldn't; almost as if it were in the Neutral position, only you could hear a little bit of gear drag. All of this was done w/o the front drive shaft installed, because I didn't have one.
Since then, I switched out the transfer case with a NP 203 that has had the P/T conversion installed, because I want to put lockouts on the hubs. When I took the original 203 out (thinking it was bad anyway), I noticed the shifting linkage had some slight damage to it, like the front output yoke had come into contact with it at some point. I started thinking that possibly the only thing wrong with the case was the shifting linkage. Could someone give me an insight on the symptons that I described earlier with the original case - driving in 4 HI w/o a front driveshaft. Could this be the reason it would seem to come out of gear on deceleration? Or could the shifting linkage be the cause? I don't want to junk the original case if there is essentially nothing wrong with it.
From what you describe, if the original t-case does NOT have a part time kit, it is operating correctly. The front driveshaft would have to be installed in the truck to operate it without the lever in the "LOC" position, hence the creation of the part time kit. Go try it again... put it in the normal position where you can hear the gear noise but you don't move, and have a friend look under there and see if the yoke for the front driveshaft is spinning. If the yoke is spinning, everything is working right.
Many people think that by doing a part time conversion on a 203 they are going to improve gas milage. The truth is, it wont. The 203 is a great transfercase and if all the driveline angles are set properly its also very smooth at any speed. Personally I wish they would offer a full time 4 wheel drive option on one ton trucks today. Once you use full time 4 wheel drive and realize all the benefits its hard to go back to the part time
the NP203 when original has a differential in it so taking the front drive shaft out is like lifting a tire up on an open diff axle, the tire in the air spins (front yoke) and the tire on the ground does nothing (rear drvie shaft) becuase the front is easier to turn. when it is in either hi loc or low loc position the differential is locked and sending equil power to both the front and the back, that is why you you are able to move in hi loc but not just hi.
Taking the front driveshaft out never really help get better gas mileage, the only thing it would do was take constant strain or useage off of the front end.
Your problem is in the linkage and not the transfer case, I thought my 203 was a heavy piece of crap, and I almost junked it, but decided to try and fix it, and after I opened it up, looked through it, I couldn't find anything wrong. I put it back together and manuely put it in 4wd(I have a part time kit) on the transfer case, and it was fine, put it back in, and 4wd didn't work. I looked at the linkage, and that is the worst design I have ever seen, it's adjustable, and just cra*py to say the least, Now I leave the lo and hi linkage on and crawle under the truck when I want to put it in 4wd.
I educated myself on the interns of the original 203 before I decided to switch it out. What baffled me was that it would move at all in the 4 HI position. Again, it would start out just fine in 4 HI, but as soon as I would let off of the pedal (gas) it would sound like it was out of gear or "drag" a little. I thought that because of the differential aspect of the fulltime 203 that it wouldn't move at all once it was taken out of the LOC position and put in HI (without the front driveshaft installed).