My pajero transfer lever has locked up coming out of 4LL and has locked trasfer in neutral

sounds like a problem either with the 4x4 switch or the linkage thinking the transfer case is in neutral.

1. • 1 Start your Dodge truck's engine.
     
   • 2 Turn the electronic transfer case from "2WD" to "4WD Lock" to engage the high range 4WD, if the dodge truck is equipped with an electronic transfer case; otherwise, shift the transfer case lever from "2H" to "4H." The electronic transfer case is located on the instrument panel and is marked with "2WD," "4WD Lock" and 4WD Low." The lever-equipped transfer case is located to the right of your leg and is marked with "2H," "4H" and "4L."
     
   • 3 Shift the transmission into "Neutral" while the vehicle is either stopped or rolling at 2 to 3 mph to begin engaging in the low range 4WD. Turn the electronic transfer case to "4WD Low," if the Dodge truck is equipped with an electronic transfer case; otherwise, shift the transfer case lever from "2H" or "4H" to "4L."
     
   Tips & Warnings
   • Indicator lights will come on and alert you that your vehicle is in either the high or low range of 4WD.
     
   • Do not engage in the low range of 4WD drive if the transmission is in gear; you must shift to "Neutral" first.
     
   • Many Dodge trucks allow you to shift from 2-wheel drive to the high range of 4WD at up to 55 mph--consult your truck's manual to ensure that this is possible. Do not exceed 55 mph while engaged in the high range of 4WD. Do not exceed 25 mph while engaged in the low range of 4WD.
     
   • Do not engage in 4WD unless you are on slipper or rocky roads.
     

Need better info lots of parts in between rear transfer case also has axles in the cases

Yes it can, just place your Transfer Case in Neutral position.
Shifting into NEUTRAL
To shift the transfer case to NEUTRAL do the following:

Make sure the vehicle is parked so that it will not roll.
Set the parking brake.
Start the vehicle or turn the ignition to RUN.
Connect the vehicle to the towing vehicle.
Put the transmission in NEUTRAL (N).
Shift the transfer case to 2HI.
Simultaneously press and hold the 2HI and 4LO buttons for 10 seconds. The red NEUTRAL light will come on when the transfer case shift to NEUTRAL is complete.
Shift the transmission to REVERSE (R) for one second, then shift the transmission to DRIVE (D) for one second, or FIRST (1) for vehicles equipped with a manual transmission.
Turn the ignition to LOCK.
Place the transmission shift lever in PARK (P), or FIRST (1) for vehicles with a manual transmission.
Release the parking brake prior to towing.
Shifting Out of NEUTRAL
To shift out of NEUTRAL:

Set the parking brake and apply the regular brake pedal.
Shift the transmission to NEUTRAL (N) and turn the ignition to RUN with the engine off.
Press the button for the desired transfer case shift position (2HI, 4HI, AUTO 4WD or 4LO).
After the transfer case has shifted out of NEUTRAL the red light will go out.
Release the parking brake.
You may start the engine and shift the transmission to the desired position.
Excessively shifting the transfer case into or out of the different modes may cause the transfer case to enter the shift protection mode. This will protect the transfer case from possible damage and will only allow the transfer case to respond to one shift per 10 seconds. The transfer case may stay in this mode for up to three minutes.
NEUTRAL: Shift the vehicle's transfer case to NEUTRAL only when towing your vehicle.
Good luck and hope this answers your question.

if your vehicle has manual locking front hubs then you need to turn them to lock first. then it's best to have the car on but not moving and perhaps in neutral gear put in the clutch and using the transfer lever select either low or high range. some vehicles need to go in reverse first before the transfer gears engage; that is usually hiluxes.Don't forget to do this procedure in reverse when returning to normal road driving as it is not good for the car to be driving on the road in 4x4

The 1996 discovery is full time 4wd and can only be changed from high to low range using the transfer case shifter with the truck in neutral rolling between 1-5mph. you can also move the same lever left to right to engage the transfer case diff lock

no i do not think its your tran. it could be a dust shield or a heat sheld came lose. it happen to me befor .and the car was fine. ok have a nice day

The pajero has a limp mode for when there is an issue with the 4x4 system. The ECU apparently limits the vehicles capabilities until the problem is fixed. By turning the car off and on again you are reseting the fail-safe until it again triggers. The fault may be that a part of the drive train, secondary transfer case or auto locking hubs is not working correctly. For my Pajero, the auto hubs were not disengaging. This was later found to be caused by sticking air solendoids. Each solenoids cost was about $200 and there are two for the hubs. I was able to free them up by soaking the solenoids in CRC/ WD40 and a bit inside the air tubes as well plus repeatedly engaging and disengaging the 4x4 lever to activate the hubs. The auto hubs may not be the issue in your case but its worth a try.

Check Linkage for the 4WD transfer case, between the shifter and the case. if it is a direct case mounted shifter, you may need to remove it and check for obstruction.

Have you tried to shift it to 4H while at a slow roll in N? Sometimes that used to work for me in my older floor mount 4WD truck. Give it try!