1997 f150 4x4,the problem is the truck does not shift into 4-wheel drive even though the light on the dash says I am in 4 wheel drive????the truck has a manual transmission.

Call the dealer.

The most common issue is the encoder motor on the the transfer case.

always put in neutral before switching in or out of 4 wheel drive unless vehicle is equipped with on the go shifting

The clicking you her is the switch sending the signal to the motor on the transfer case that you are locking in 4x4, I would just be sure I was at a complete stop and in park or nuetral when you lock it in, I know it says shift on the fly 4 wheel drive but it is easier on it mechanically if you are at a stop.

Check for and cracked or broken vacuum hoses. When you have a vacuum leak. It usually causes really hard shifting or no shifting.

Sometimes the solenoids will stick on the axle neither in 2 or 4 wheel drive, if this problem started when you weren't shifting between two and four wheel drive it is probably the push button switch cluster on your dash going bad

what sounds like is happening is the front end is not disengaging, it will not hurt it to drive without the module, but you need to find out why the front diff. actuator is not releasing. their is a shift motor on the transfer case, module and switch in the cab, and actuator on the front diff. all are susceptable to water, I would suggest getting a manual on it to aid in diagnostics

I am going to assume that you have auto 4x4, and not manual shift base model.. it just sounds like the servo motor that shifts between 2x4 and 4x4, has gone bad

question:
does it still engage into low range, even though it is stuck in 2x4?

I have to stop, engage 4H or 4L, and shift into nuetral and then the front gear box will then engage and you can hear it from nuetral and the engine at idle, it will slip into gear, if not, in gear go slow with 4x4 light "on" and while rolling slip into nuetral and then back into D, Some transfer cases will not engage in Overdrive, the D with a circle around it so shift into 3rd gear the one to the right of the D with a circle around it. 4 H has a speed limit, and do not shift into 4L while on pavement or you can do some damage.

I'll assume that you have a 4x4 switch on the dash; check the shifting motor and plug on the transfer case, or the digital output from the GEM module which controls the 4x4 operation.