I'm going to work on it tonight and i'll check the vacuum diaphram under the battery and on the firewall.
The service 4 wheel drive light is on as well and i'll put that on the scanner tonight.
My buddy has a '99 Blazer as well and we might even try swapping some parts out to find the problem.
What do you think about the transfer case? I can hear the encoder motor buzzing below but I don't hear a clunk or that it has moved the transfer case.
If it has vacuum problems will it not allow the encoder motor to shift the transfer case?