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It's the transfer case motor.I had the same problem exactly and replaced, now it works great. Part is about $100.00 ( aftermarket ) .Ifyou are going to replace yourself you will have to remove front drive shaft and remove yoke from transfer case with an impact wrench for clearance to remove transfer case motor . When you put the new transfer case motor in make sure you line up slot with grove in transfer case motor. Good Luck.
Having 4 wheel drive is not actually the case unless you have limited slip on both axles. Do you know if one wheel will spin on both axles. If you can't get either wheel to spin on the front axle and one will spin on the rear then I would agree your not getting front wheel drive. Since you can tell a difference between hi/lo the transfer case is definitely engaging
If you have tried shifting stopped and moving, then I'd say the transfer servo could be broken. It is the motor on the transfer case that shifts it in and out of four wheel drive. If you know how to use a voltmeter, test the wires that run to the servo to see if it is getting the signals it should be. Newer vehicles usually have a computer associated with the transfer case motor. You could have the car plugged to a tester at auto zone to see if it is giving a code.
I had that problem in my 1998 Blazer. There is a module on the passenger side of the truck, next to where the passenger right foot be. Remove the side kick panel to get to module. Disconnect battery before unpluging and pluging new mudule in. This unit controls the electronic switching between 2 and 4 wheel drive..Wes