96 Sub Transfer Case noises

Pulled away from stoplight in my 96 Sub. Started hearing a noise (sounded like from transfer case) that sounded like a dry bearing spinning at high speeds. It was intermittent and went away. Tranny shifted fine....just heard the noise.

Got home and pulled into the driveway. Backed up and I got a loud thud/pop like something was binding up. When i put it in neutral and shift it in an out of 4WD LO, I get a lot of noise...more thuds and even that sound of driveline windup like you get when you have a u-joint that's about to go. But bear in mind...I get noises when I'm driving and it's in 2WD (at least that's what the indicator on the dash says)

I know nothing about transfer cases and can't seem to find any good troubleshooting references.

I drained the fluid and there were very small metal particles in there, but nothing that seemed like it would be a concern. Of course you can't really see the teeth or the chain very well.

Someone suggested the snap ring on the tailshaft is a weak point and could be the issue. Another suggested that the shift motors go flaky and can casue similar stuff, but it seems like that would only be true if it's not going completely to 2WD or something.

Help! I have no clue how to troubleshoot this one. Don't mind replacing any of it including the transfer case, as long as I know that's what it really needs!

Put it on a rack with all 4 wheels off the ground and see if you can find where the noise is coming from. I just changed the tx case fluid in my '98 K2500 sub and had NO metal particles at 125k. If the tx case is shifting without a command it should show up with some lights blinking on the dash buttons. Let us know what you find........Steve