My sons 96 Grand Cherokee has started a terrible popping/grinding noise. It sounds like it's coming from the front end. It doesn't matter whether it's in 4WD or not. I recently replaced the tranny and rear-end. It's been driving just fine. He was driving along about 35mph and he says it "banged" and sounded like something dropped out and hit the ground. Nothing did, but it does grind and bang when I just creep it forward and back in the driveway.

Can I convert from 4WD to 2WD? Can I disconnect the transfer case?

You can pull the front driveshaft but if the axle cv joints are trashed it won't help much. They will still be turning. You might want to pull one and see if it's bad. If so I'd just replace with a new axle. I'm not a big fan of rebuilding cv joints. Messy work.