You have the Quadra-Trac Transfercase (aka: NP249), not transmission.
Sounds like your VC (Viscious Coupler) is shot. The VC is what transfers power from just the rear driveshaft, to the front. You have threeoptions:
1) Replace the VC.
2) Replace the entire transfercase with a junkyard NP249 TC
3) Replace the entire transfercase with a new Command-Trac (NP231/NV231) or Selec-Trac (NP242).
'04 WJ, 6" Clayton LA's, 242 SYE, 35" BFG MT KM2's, 4.56 gears, & D44a locked
'14 WK2 Limited w/5.7L, ORAI, & Tow Package