Have you tried blowing some compressed air through the cable to blow any moisture out? The only other thought I have is to replace the cable.
On the grinding noise, where does it sound like it is coming from? Front wheels, engine, transmission, transfer case, differential, rear wheels? The grinding sound could come from warn bearings, warn brake pads and frozen calipers (I had that problem on a 93), gear problems in the differential, etc. Try to isolate it a little more.
2000 Jeep Grand Cherokee V8 Stock
93 YJ I6 hard top (really belongs to SPEED)
RE 4.5" Extreme Duty Lift, Advanced Adapters SYE, Tom Woods CV Drive Shaft, EA589 10" rims with 33" x 12.5" MT/Rs
Bullet Proof Front and Rear Bumpers and Tow bar