4WD Problem?

Hi: I have a 99 Sierra Sportside Z71. Last week I was having a problem with the A4WD. The service 4WD light came on, Did a code search - nothing. Started the truck and no light. Happened a couple of times. Once I had tried to press the 2HI button and nothing happened so I pressed the 4HI button and the 2HI light came on. Then pushed the A4WD button and nothing. Tried an hour later after letting the truck sit and it worked fine. Today driving down the street it seems like the transfer case started making a grinding noise. When I let go of the gas the noise went away. Happened a couple of times. But not all the time. I had it in A4WD - Pushed the 2HI button and the noise has not come back. It has been very wet and icy here from melting snow and freezing again. Any ideas what my problem might be?
Thanks Darrell

i have a 2000 Z71 and my sevice 4wd light came on and the little lights on the 4wd switch went out. it was the switch thats bad! it happens all the time the connections inside the switch are loosing connections

Many, Many,Thanks! Replaced the switch today with a new one from GM ($76.00 CDN) and it works perfectly..
May have another problem though - When I bought the switch I figured I might as well buy some Automatic Transfer Case Oil. The guy at the counter said I need GM Dextron III Transmission fluid GM#10952622, I told him my owners manual said I needed GM Automatic Transfer Case Oil GM# 12378396. He got alittle upset at me for questioning him about it and said they always put Dextron III in both the Automatic Transfer Cases and the Manual one also. He said if I didn't beleive him they would change it for me *at $108.00 (cdn) an hour shop rate - NO THANKS*. So I bought the Dextron III and put it in. Kinda awkward filling with fill hole so high but got it done. Only took 2 litres. My question is will I encounter any future problems if I keep the Dextron III in? I believe I caught the guy off guard when I ask for the particular GM # of oil and he hesitated and stuck to his guns on the Dextron III. He is a GM professional, I should trust him: shouldn't I?