In stock from, YJ front axles have open dif's. The CAD (Central Axle Disconnect) is just there to disconnect the passenger side axle shaft so that your front drive shaft doesn't spin all the time when in 2wd. It basically takes the place of manual hubs (like are found on most older 4x4's).
Also, due to how an open dif works, spinning only one tire (front or rear) is verry common.
For the light, check all the vac lines, and the wires for the light, and also check the bulb.
maroon 1987 Grand Wagoneer. stock for now...