4 Wheel drive
First, on dry pavement when you turn it will feel like your front tires are scrubbing and jerking, because they are. the front and rear axles HAVE to turn at the same rate when it's in 4wd, but because the front wheels are turned and the rears are not, they track different circles and therefor travel different distances. So the "locking" you're feeling is driveline bind, which is alleviated by the front wheels "skidding" to relieve the tension. It's normal, however you should not really use 4wd on dry pavement as it puts horrible strain on the driveline and can end up with broken u-joints or worse. Short distances are ok, but try to limit it as much as possible and keep the speed low.
Now, about only one wheel turning when it's on the lift. That also is normal, because you have an open (i.e. not locked or limited slip) differential in the front. Because of friction caused by the brakes, wheel bearings, etc. when you are idling, there is only enough power to turn one wheel, so it picks the one with the least resistance. When you step on the gas a little there is enough power to overcome that friction and both wheels will spin.
So, I'd say so far your system is fine.
When you said the oil in the front diff was grey, did you mean it had a milky color, or was it just sort of a metal color? If it's a metal color, then it's normal. The gears in the front end (and rear for that matter) produce fine shavings of metal that gets suspended in the oil (which is the reason why you need to change it) and turns the oil a metalic color. If you look close enough at the oil you should be able to see the tiny metal particles.
If the oil was a milky color, then odds are it was contaminated with water. Did it also have a frothy consistency? If that is the case, then you might have worn out some of the bearings in there, and even potentially the gears themselves, but it would take a fair amount of time to do that. If you suspect that is the case, I would run it with the fresh fluid you just put in for a little bit, then change it and check the consistency of the used oil and see what it's like. If you're still having problems or doubts at that point then take it to a rear-end specialist and see what they think.
I also heard from a friend about the transfer case clutches binding.Is this true with the torque on demand?I also changed that fluid.
As far as your original question, thats normal. Only use 4wd (not a4wd) in low traction situations or you risk breaking parts for the torque bind.






