4wd makes loud noise, also pops out of 4wd

Sounds "used and abused"!!! Likely you have more than one problem. Transfer case may need linkage adjustment or rebuild. Grinding from where? Wherever the noise is, look for a problem. Pulling can be from any number of front end component failures. Your best bet is to give everything a careful inspection or have a reliable shop go over it for you. There are so many variables in this I couldn't possibly give you any real answers!!!
good luck!