I have a 2002 2500 Silverado with 170,000 miles. When engaging 4HI or 4LO there is a grinding noise coming from the transfer case. I took off the actuator on the transfer case and it work fine. I removed the front driveshaft and manually engaged 4wd. While turning the rear driveshaft I was able to stop the front drive shaft spline from turning with just my hand in all positions. I thought it was an actuator problem but it appears to be something else.
Any help would be appreciated.
Thanks,
Chad Mason

when was the last ransfer case fluid change?

about 70,000 miles ago.

Are you sure it is not the front axel?
How is the fluid levels and fluid condition?

I have several suggestions:
1. fluids must be done at 60K and I've heard that T-cases are very sensitive to those. don't go cheap and use best there. I do Amsoil.
2. make sure that your tires are perfectly same diameter front to rear. otherwise, it throws gears out of kilter and it is noisy like heck. been there.
3. your Tcase is caput.