[slumapas]

First off, I own a 99 GMC Sierra Ext Cab Shortbed with the 5.3L V8, Automatic Transmission and Auto 4WD.

I'm suffering from the oh so common "Service 4WD" light and I'm hoping for some insight. I've search through numerous threads both here and on other forums and there are many with similar problems, but not exactly what I'm facing so far. Here's what I've got:

When in 2HI I never have any issues with service lights, shifting or driveability.
When I go to Auto 4WD or any other 4WD mode everything seems to shift fine and I don't get the service light until after I've started driving.
While the light is on, I'm stuck in whatever mode I was in before the light came on--I need to turn off the truck and start it again in the mode I would like.
While in 4WD mode (HI or LO, cannot tell for sure in Auto) The truck seems to be operational with good traction in slick weather. I drove this truck for several days during our winter blast in Dec and never got stuck even through 14in of snow and ice and with no chains. The service light, however, was on the majority of the time.
I've already changed the mode switch on the dash (2 days ago), drained and refilled both the transfer case (with Autotrak II--smurf fluid) and front differential and checked the front driveshaft to see if it's engaged while in 4WD (it is locked).

My thought it that it could be the front driveaxle motor or the sensor in the transfer case encoder motor OR maybe a speed sensor on the transfer case? My question(s): Is the only way to troubleshoot via the dealer for $100? Are there any other ways to test other components? Anything I may have missed?

Sorry for the long post, I just wanted to try to explain everything as thoroughly as possible.