'94 K2500 5.7L auto shifting / 4x4 issues

[grasshappa]

Howdy, all! I love the forum, but right now I wish I could say the same about my recently acquired truck...

Some history: the guy I got it from used it pretty hard as a work truck and often pulled heavy loads with it. It has 300k miles on it and 80k on rebuilt engine and tranny. I've used it 15 times to go to the forest and gather firewood, using forward gears, reverse, and 4x4 without a single problem, and without it giving me a sign of a problem. Someone borrowed the truck to do the same thing, and they returned it broken!

Presently, when it's put into neutral, it acts exactly as if it's in park. It's sitting on a bit of an uphill now, and it rolls back a couple inches and then clunks to a stop as if the parking pawl engaged. When it's put into reverse, the engine and transmission sound like it went into reverse, but the truck won't budge. When it's put into drive it usually engages and actually goes forward, but not always. Lastly, the 4x4 H seems to work, as the light comes on and it makes the sound which seems like the front axle has been engaged. 4x4 L is really fickle to get into and out of, I'm guessing because 'neutral' doesn't seem to be acting like neutral. All of the forward/reverse/neutral symptoms seem to be the same in 2wd or 4wd.

As for how it happened, he said he was backing up in 2wd, and it got to be too steep of an uphill and he needed 4x4, so he put it in 4x4 (I hadn't shown him exactly how to do this, and he apparently wasn't familiar with the floor shifter) and couldn't get it to engage into 4x4. Then he had no drive gear and no reverse either, so he tried forward and reverse for a while until he finally got the drive (2wd) to engage, and he drove it back to my driveway (and parked it front in.)

Oh, some more history, I think it still has enough tranny fluid in it (it's not sitting level, so I'm not sure how accurate the dipstick is right now) and the tranny fluid looks like it could use a change, since it's a little orangish.

So, is this almost certainly the transmission that has been jacked, or could it be something in the transfer case, or something else that I'm clueless about?

Your help will be greatly appreciated. Thank you all very much in advance!