Probably the encoder motor, or do you have the stick in the floor for the t-case?

Also how many miles are on the truck?

Look for the pump rub hole on the t-case, it is a common problem.

I see you have the 2007 model, is it the NBS or the classic?

I will be out of town starting in 30 min. until Sunday, so if you need any help with this, I can get you going in the right direction, I have some knowledge of those New Process 261-263 Transfer cases.........