4WD Transfer Case Problem

I have an intermittent problem with my F-150 4WD Transfer case. I'm just driving down the road and I suddenly hear this loud clicking/grinding/screaming noise. If I switch/turn the knob on the dask to 4wd high, then back to 2wd, the noise stops. The 4WD still engages when I need it. I plan to get it looked at when I have time to be without my truck, but does anyone have an idea as to what the problem is? Am I doing more damage by driving it or is the damage already done?

What transfer case is it? I had a problem with mine kind of like that, except it wasn't intermittent, when it reared its head it put me on the side of the road and I ended up driving it home in low range to avoid a tow bill. I fixed it myself so it only cost me couple hundred bucks, but by far the worst part of it was getting the torsion bars out of the keys so the crossmember would slide back. Long story short the range shift fork that shifts the transfer case into low range is plastic in mine, the shift collar is aluminum, so guess what wears out. I lost everything and started walking but my wife messed with the shifter and got it caught in gear, it was low range, but atleast it moved.... My tcase is a lever type, but yours could be the same case with an electronic shifter.

What engine do you have and what year is your truck?
Mines a 2002 4.6 with a 4r 70 auto and its a 5 lug. Don't remember which t case it has, but if you have the same combo surely you have the same tcase. I can look to be sure later. Don't know about the ford, but working on gm I know that the encoder motors that shift the case have a sensor in them that tells the motor if its in the right gear, they can tell the motor the wrong info...