It sounds like your trans is low on fluid.
As I said the transfer case and trans dont share the same fluid but depending on the tcase they do use the same type of fluid.
Theres a seal on the rear of the trans and on the front of the transfer case, so just seeing red fluid in between doesnt really say which is leaking. Fairly certain the little gap left is to let you know something is leaking.
The seals are fairly easy to replace. Remove rear drive shaft drop transfer case pull seals and tap back in.
Ive had to replace my transfer case once and the seals on both so ive done it several times.. I have found its easier to leave the crossmember in place though as some will say to remove it.
- Joe -
'95 Jeep Grand Cherokee Laredo I6 4.0L
242TC - Extreme Engineering 2" Front Lift/1.75" Rear Lift - ES9000 Shocks + JKS BPEs
Moog Cargo Control Springs
Magnaflow Converter - Dynomax Muffler
235/75/15 AT Uniroyal Liberator Tires