Is the system ESOF ( Electronic Shift On the Fly ) or MSOF ( Mechanical Shift On the Fly ) ?
Operationally vacuum holds the IWE ( Integrated Wheel Ends ) out, and once vac is removed the spring engages the IWE.
Lift and support the front of the truck so the front wheels are off the ground ( take safety precautions, chock wheels, jack stands, etc )
Key on, engage 4x4 and try to turn the front drive shaft.
If it turns it is a problem with the transfer case.
If it doesn't it is a front axle engagement problem.
- If the front drive shaft does not turn :
Shut of the truck ( still jacked up, and supported ) remove the vac lines from the IWE. The spring should push the gears in, without the vac line on.
Check the vent line ( tube that is routed into the engine compartment with nothing attached to it ), for blockages.
If the vent line is clear, and with the vac lines off the IWE should be engaged ( both front wheels locked ).
If they lock, the problem is with the IWE solenoid not shutting off vacuum to the IWEs. There is a TSB on the 2004-2006 IWE solenoids, a newer revision has been made, and used from 2007 and newer MYs.
Here is a block diagram of the IWE system
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