rear end explosion...help

My brother has a 92 Chevy halfton 4x4 automatic. He backed out of the driveway, put it into drive and it made a loud noise. The rear end had a hole right through it. We ended up putting a new rear end and front end into the truck cause we couldnt find 10 bolt with 342 gears. We just got all the new stuff in and we went to go drive it, and all we have is REVERSE and FIRST, all the other gears it revs up and makes funny clunky grinding sounds. Could someone please help me what this could be??? Is it the transfer case???
My brother thinks when it first happened, he put it in 4 wheel drive and put it in reverse before taking the drive shaft off. My dad thinks this is what screwed it. change transfer case?or rebuild it?
Thanks alot!
Terry

Your transfer case should work just the same regardless of which gear the transmission is in.

Just so I know, you put the auto trans gear selector in R (REVERSE) or 1 (FIRST) and its okay, but if you use 2,D or OD it does not work?

If this is the case, it sounds like a transmission problem.

Also, the cause you mention for the problem is not very clear, but it sounds as if it was in 4wd when your brother backed out of the driveway. This is the only way to break a rear end like this.