If I'm not mistaken, the switch that sends the signal to the light panel is located just above the vacuum actuator on the right side of the front axle. I think this is right, b/c I replaced this switch when I installed a posi-lok.
But think, it could be much worse. The light could work just fine, but the 4wd could be broken! This was a problem that I recently had with my YJ.
'97 ZJ, 4.0L, Gibson Cat-back system, Daily Driver
'95 YJ, 4.0L, 3.5" BDS suspension lift, Boomerang Shackles, BDS Shocks, 33x12.50 TSL's, Lock-Rite in rear, No-Slip up front, Posi-lok, Warn XD9000i winch, and a ton of dried Mississippi mud!