What fixed it for me was checking BOTH sides of the axle. I was only repairing one side, in an attempt to only fix what is broken. It was very difficult for me to discern where the squeak was coming from. It always sounded like it was coming from the wheel well I was listening in.

I tried metal listening rods (like stethoscopes, but not as good, and I couldn't find my stethoscope) and even some electronic Chassis Ears, but was unable to pinpoint the noise. Not until I recruited a set of human ears that were at least 10 years younger than mine, and had him listen at one side of the axle while I turned the other side... was I finally able to realize that the noise was coming from the opposite side of the axle, even though it sounded more like it was coming from inside the axle.

In summary, to find the noise, both wheel ends need to be broken down. From my diagnosis thus far, it appears that the knuckle seal lost its internal grease, and the metal components of the seal were scraping against each other. Or... it was the drawn cup needle bearing that stabilizes the axle. The allegations against the knuckle seal are from the observable wear and looseness of the seal. The allegation against the needle bearing are due to the fact that the noise stops once the needle bearing is removed from the knuckle.

I'm going to pull both axles and replace all 8 seals (2 dust seals, 2 knuckle seals, 2 bearing O rings, 2 hub O rings). Before installing the new Orings, I'm going to temporarily install the freshly regreased unit bearing and locking hub with the old O rings, to see if the noise disappeared. If it does, I won't know whether or not the fix was the new knuckle seal or the relubrication of the needle bearing that did the trick... but I won't care.

What I really care about is if I hear the noise again. If that is the case, then I'll need to replace the needle bearing (but not the unit bearing). And then rinse repeat reinstall using the old O rings. If fixed then great, pull the unit bearing back out, fit the new O rings on it and the hub, and button it up. If not fixed, then pay the big bucks for a new bearing assembly.

The point is, the rotational noise that happens when the manual hubs are locked WITHOUT 4x4 engaged appears to still involve wheel END parts, not internal axle tube seals or parts. As to why the noise happens when the axles are rotated by the tires instead of the front drive shaft remains a mystery to me... but in my case, the noise went away once both the unit bearings were pulled, even though no noise is heard with these same bearings whilst the hubs are unlocked.

 

I get a squeak from the front end too sometimes but mine is coming from the pinion. It ended up being the rubber dust boot at the back of the front pinion rubbing. First time I took it to Ford since it was under warranty and they just greased the rubber boot, second time I greased it myself.