Front Differential

I've got a 99 and was off-roading lightly over the weekend. Drove about one mile on the road with the all time 4x4 still on only reaching about 50 mph when I realized that it was on. Still going 50, I reached down and put it 2 wheel. Half a minute later the handling got sloppy. Pulled off onto a smaller road and felt like the 4x4 was still engaged. Drove it about 5 miles to a friends and the front differential was smoking.

Did you ever check the differential fluid??