Clutch will not engage all the way

Getting it only when you drop it into 4wd suggests this is an issue somewhere from the transfer box down to the front wheels. If you can Safely get under the vehicle, use a flashlight and check for any obvious damage like loose driveshaft linkages and rubbers.
You will also need to find out what that light is for. Your vehicle uses the older OBD1 system so the new OBD2 scanners may not read them.

QU40221 19 Spline Outer Axle Shaft for 1977 to 1991 Chevy, GMC Corporate GM 10 Bolt Front Axle is a genuine original equipment outer axle stub shaft for all GM 10 Bolt front axles in 1977 to 1991 Chevy Blazers, GMC Jimmys, and Suburbans, plus Chevy, GMC 4x4 1/2 ton and 3/4 ton Pickups. The splined end on these new axle shafts has three snap ring grooves in three places so they are compatible with all types of automatic and manual lockout hubs plus all full-time solid splined drive gears.

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see this vdio

Pinion seal? Wheel bearing seals? Several different rear axles could be in your 3/4 ton--full float or semi-float. Once again you are wise to buy a cheap shop manual which will tell all.

Fairly simple process( but not always easy,Just warning you in advance) 1. Disconnect rubber brake line from top of axle.Plug appropriately to prevent fluid loss. 2. Disconnect e-brake cables. (beside the frame on driver's side) 3. Remove shocks ( or just diconnect at either end) 4. disconnect driveshaft at axle and leave in trans (if possible) to prevent fluid loss. 5 Axle can now be removed by either removing the bolts at each end of the springs or by removing the u-bolts attaching the axle to the springs

1 Disconnect hydraulic brake line. 2. Disconect e-brake cables beside the frame. 3. Disconnect driveshaft. 4. Remove shocks 5. Disconnect ABS wiring (if equipped) 6. Remove bots at each end of springs or remove u-bolts that are holding the axle to the springs

when in trouble replace the whole diff housing for the new 14 bolt diff. from the wreckers.

I wonder if the ring and pinon has to much back lash, Do u have any movement in the u joints?

A stock 14 bolt rear end hold about 3 quarts. To drain the differential you will have to pull the rear cover. I jack up one end of the axzle and let drain for a while and then the other end for a while. This assures you get as much of the old fluid out as possible. After the case is drained replace the rear cover with a new gasket(I usually just use permatex ultra blue silicone). Refill the case through the fill plug located on the side of the pumpkin. Fill until the fluid starts to come back at you through the hole. Be sure to check if you have a posi or limited slip differential because you will need to add an additive to make either of these work properly. Make sure to add the additive before you top off the fluid so you don't overfill the case. I generally drive 50-100 miles and then recheck the level to make sure it is full.

To remove the front disc brakes , you must remove the break caliber assembly . Keep in mind that on some brake calipers a special Torx Drive T40 or T45 must be used to remove the caliber bolts from the spindle assembly . Also , Allen (Hex) bolts are sometimes used . Be sure you have the right tools .
1. Properly block both rear wheels at the front in the back of each wheel.
2. Loosen the lug nuts on both front wheels one turn on each nut.
3.Jack up and support the front of the car on Jack stands with the wheels one to 2in. off the ground.
4. Remove the two bolts on the inside of the caliber the secure it to the spindle .
5.Once the bolts have been removed the caliber should pull straight away from the rotor and spindle assembly .
6.Remove your old brake pads , clean the assembly , properly lubricate the moving parts as necessary , especially the floating sleeve as the assembly is called a floating caliber which means half of the Caliper is bolted to the spindle (inner) but the other half floats (outer).
7.Use a large see clamp centered between the caliper piston and caliper housing to push the piston all the way back into the caliber cylinder by turing (1 turn at a time) the screw until the piston is flush with the caliber face .
8. Install your new brake pads .
9. use the reverse procedure to assemble everything back together. Good luck and be safe....

I'd have to guess your spider gears are bad