I "think" I have found the cause of my noise, the output shaft bearings for the front DS are failing. I'm almost sure that is where the noise is coming from. I am going to take the Jeep to a shop here in Indy to have them look it over first though.
IF that IS the problem I looking to buy a 242 TC in "good" shape, NOT a pile of junk! By that I mean it will turn over 360* and obviously has no holes in the case. My plan is to rebuild it before I pull the one out of the Jeep.
I have a known good 242 transfer case and im thinking about switching to a 231 transfer. mine is a 99XJ with the 4.0 and a automatic. If you can find a 231 i would be glad to trade. Hit me up if you still need one.