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Originally Posted by IA-Suburban
Does any know if the tranfer case oil mixes with
the tranmisson oil?
I drained the transfer case on my 89 and it was about 1 1/2 quarts overfilled and my transmission was down 1 1/2 quarts. So my evidence says that they do mix but no one on this list or Bobistheoilguy list can confirm that this is the way it should be. My repair manual doesn't address this issue but people have mentioned a bad seal between the two as a possibility.
Until I learn this is a problem, I leaving it the way it is. 
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NO THEY DO NOT MIX!!!!!!!
The transmission rear seal is leaking.
The fluid is going from the trans past the rear seal down the main shaft and into the transfer case.
You need to remove the transfer case and replace the transmission rear seal and the transfer case front seal also the gasket that goes between the trans and transfer case.