O/d doesn't engage, disengage light on all time

You have a switch on the instrument panel ?
The NVG 263 transfer case features a three button shift control switch located on the instrument panel
The NVG 236/246 transfer case features a 4 button shift control switch located on the instrument panel.
Or
The New Venture Gear (NVG) 261, RPO NP2 transfer case is a two-speed, part-time with "mode shift-on-the-fly" capability. It has a chain driven front output shaft and an epicyclical low range planetary arrangement. The NVG 261 transfer case features a four position shift lever control located in the vehicle floor plan. As required, the operator can select 4HI position from 2HI "on-the-fly," as described in the owners manual. A dash 4WD lamp will continue flashing during shifting, until all criteria have been met and the new mode/range position has been reached. Once the new mode/range position is fully engaged and the front axle disconnect locks in, the dash light 4WD indicator lamp will remain ON constantly. Range shifting functions similarly, although it should be limited to speeds 8 km/h (5 mph) or less.

Oil level in trans Check fluid , engine idling in park , if it is full it will be internal , burnt out clutches.

What trans? AOD? This is 1992 F Series, all I have.

Shift Controls, Automatic Transmission The transmission shift control linkage or cable transfers the transmission operating mode from the selector lever to the transmission. The indicated transmission position on the steering column is transferred to a shift lever on the bottom of the steering column. On vehicles equipped with cable-operated shift systems, the indicated position of the transmission selector lever is transferred to the transmission through the shift cane, then to the cable, and down to the transmission manual shift lever at the transmission. On vehicles equipped with shift rod assemblies, the rod transfers the indicated transmission selector level position through a bell crank assembly to a control rod. The control rod transfers the indicated position to the transmission assembly.
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Automatic Transmission Manual Linkage Adjustments

1. With the engine stopped and the parking brake applied, place the transmission selector lever at the steering column in the D (DRIVE position) for C6 applications and in the (D) (OVERDRIVE position) for AOD and E4OD applications, and hold against the D or (D) stop by applying a three-pound force to the selector lever knob.

1. Loosen the shift rod adjusting nut at point A. Refer to the following illustrations.

1. Shift the manual lever at the transmission into the (D) (overdrive) position for E4OD, by moving the lever all the way rearward, then forward two detents.

1. With the selector lever and transmission manual lever in the(D) position, tighten the nut at point A to 17-24 Nm (12-18 ft-lb) torque. Use care to prevent motion between the stud and rod.

1. Remove the three-pound force from the steering column selector lever knob.

1. Operate the shift lever in all positions to make certain that the manual lever at the transmission is in full detent in all gear ranges. Re-adjust the linkage if required.

1. On F-Super Duty Chassis Cab and Motorhome and Commercial Chassis recheck for correct operation of the automatic transmission selector indicator (PRN(D)21). Refer to Section 11-04A, Steering Column, Shift Rod Within Tube. CAUTION: Under no circumstances will it be permissible to adjust linkage in any position other than the(D) position for E4OD applications.
   

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Automatic Transmission Shift Cable Adjustment

1. From inside the vehicle, place the column shift select lever in the DRIVE position (C6) of the OVERDRIVE (AOD and E4OD). Hang a three-pound weight on the selector lever.

1. Raise vehicle on a hoist.

1. Remove the shift cable from the transmission lever ball stud.

1. Pull down the lock tab on the shift cable body.

1. Position the transmission shift lever in the DRIVE position (C6) or the OVERDRIVE position (AOD and E4OD). This is three detents from the front-most lever position with the first position counting as one.

1. Connect the cable end fitting to the transmission lever ball stud.

1. Push up on the lock tab to lock the cable in the correctly adjusted position.

1. Lower vehicle down from hoist and remove the three-pound weight from the column shift select lever.

1. After making the adjustment, check for park engagement. Check the transmission control lever in all detent positions with the engine running to make sure correct detent/transmission actions. Readjust if necessary.

If you are looking at the distributor (mounted in behind the camshaft:
The order is 4,3,1,2. Cylinder 4 is closest to the distributor and cylinder 1 is at the timing belt side of the engine. 4 is on the far left of the distributor cap, 2 is the last one on the right.
If you continue to have starting and running issues, and all other issues related to air and fuel have been vetted out, the crank angle sensor is next on the list. Usually the system cannot detect Cylinder 1 and it will guess as to what Cylinder 1 is before it gives up. If you meter the sensor (three wires), two will meter between 200 and 300 ohms. Still no-go? Make sure your fuel system is working properly. On Regina models, the oxygen sensor is a PTC resistor, and on Luftmassenmesser Hidstraht it is a galvanic battery. They are not interchangeable.
On Regina models, check the ignition coil connections. This is the square box on the driver side suspension turret - it is removable and the coil can be separated from the control unit. There are two connectors for the coil, what happens is they start to galvanize over time.
On LH models, the coil is on the passenger side suspension turret. Check those connectors as well. Also on LH models there is a Power Stage (a couple of transistors) on the front of the engine bay, aside the battery. Although you can test it, it is better to change it since the heatsink grease is usually baked by now, resulting in overheating of the joints in the case.
On Regina models, you do not have the Power Stage there - it is integral with the coil.

What is happening is the tranny is going. They can try to replace the selenoid, but really, you need a rebuild. Whomever charged you to remove the light, probably messed things up more. Volvo's typically lose overdrive before losing all the other gears. It is time for a rebuild. Go to a reputable tranny shop who knows volvos.

The starter sit on top I belive on the passenger side above the transmission, have some one hold the key to start while you tap or even hit the starter some time it will crank over if it does replace it, not that big of a job. If it still dont start there a big wire that one comes from the battery and a small one that come from you ignition switch ( key ) jump those two wire's ( if stander transmission make sure you have it out of gear ) there should be voltage at big wire all the time, if it still dont crank over replace starter assembly.Hope this was very helpful.

check overdrive or shift fuses. look in owners manual for location

This is a standard shift I am presuming if so this usually indicates a bad synchronizer in the transmission. if it is an automatic trans. it is a speed sensor malfuctioning.

possible range selection detent switch not working causing to get stuck some times in one range only and wont shift to other range 4wd light in dash just keeps flashing for about 10 seconds then goes to previous state this then can jam up 2wd 4wd lever that you then cannot move.
there are 3 switches 2 on trans/transferr case, 1 on front LH diff axle tube actuator (shift on fly). can cause damge to the electric actuator then on transferr case.
suggest you get a dealer to look at or some one that knows this system. is also vaccum operated on front diff shift on fly unit and there were 2 different systems fitted to these vehicles push button 4wd on dash and lever next to gear lever which i take is yours

Did you just replace the clutch? If you have not there is a few things that will cause this, first thing is if its hydrolic clutch slave cyl. is stuck depressed holding clutch in disengaged position, secound thro out bearing is caught in fingers of pressure plate holding clutch in disengaged position, and third input shaft on trans. has broke off at spleens in clutch disc.