Change your transfer case fluid for the updated Alltrak-II synthetic fluid. Sounds to me someone may have filled it with Dextron-III and the fluid's burnt up and causing the shudder and lockup. 97+ years saw a revised forward clutch pack in those NP transfer cases used in on demand, and full-time AWD systems. It also affects AWD/SmartTrack Astro minivans and other "clones". These include Bravada, Jimmy and of course Blazer too. You have nothing to loose and all to gain on what may be a professional, technical error on the behalf of others. Swap for the blue and drive her a good 200 miles or so, drain and then refill with blue again. It will take out the burned up tar, no doubt on my behalf; that is sloshing in your transfer case at the moment. Once you fill her up again on the fresh blue stuff, you should be 100% okay. There is a TSB out on the matter and the consequences. Blazee may come up with the pertinent data for you, he's crazy good at that.
Sorry to hear you already serviced the front differential tubes and axles, most likely it had little to nothing to do with the real heart of your problem.