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I have gasket that is showing it's self from the hub. The hub is very hard to move from manual-to-auto. How does the hub come off to replace the gasket? Could this be why my auto hub's will not engage? 4whl drive will work with hub in manual position. Picture below of the seal.
Here is a good write up on maintaing the auto/lock hubs. A lot of guys switch to a manual hub at this time but I am still using the original auto hubs with 235K miles on them. Good luck.
You have two different problems. The o-ring that is showing in the picture does not effect the auto 4x4 operation. It is only there to seal road grime from area directly below the ****. There is a rubber diaphragm that seals the **** from the internal gears of the hub.
The o-ring is all but impossible to get out without drilling a hole in the **** and resealing. The problem is that I have not found a suitable o-ring replacement.
Your auto hub locks are not working because you have a vacuum leak somewhere. Could be a hub seal or vacuum line leak between the hub and the PVH solenoid. Most likely suspect would be the line between the hub and the frame.