I am assuming you have a 242 (selec-trac) transfer case? It shouldn't need it, but sometimes you do have to let the tension off of the driveshafts before the transfer case will shift. I have that problem between 4 fulltime and 2wd, but never the other way around. Hows the fluid looking in the tc? Might try draining it and putting in fresh.
2002 Overland - 4.7 HO, "Select-Drive", 4" RC long arms, TAG front winch bumper, 32" BFG KM's, Kolak 3" exhaust, Flowmaster 50 series