I don't have a lot of experience with an NP231 case, but building off my knowledge of other transfer case designs, it sounds to me like a bad bearing on the idler for the 4WD. While in 2WD mode, the gear (connected to the chain to the front output) spins freely on the direct drive output shaft. When switching to 4WD, it locks the gear onto the shaft so the front shaft spins the same as the rear. This makes the gear (and bearing) stop 'spinning' on the rear output shaft since it is now mechanically mated to it.
Like I said, I don't know the full inner-workings of an NP231 since I've never rebuilt one, but its the only thing that makes sense to me.
Looking to buy:
MJ, 2.5L, 5 speed, 4x4.
XJ, 2.8L, auto, 4x4