Common issue, if you do a search there are about 20 threads on it.
The transfer wont allow you to drive without a shaft in unless you are in low range.
The CV end on the front shaft (transfer case end) is a common failing, and can be found online (drivelineparts etc) very cheaply and replaced with a pair of side cutters and circlip pliers. Or you can get onto Jay as he is getting DC uni joint front shafts made up.
Its worth checking the front diff bushses as well, as they flog out and help to cause this issue. Once the boot is split they dont last long at all.
2007 WH Grand Cherokee CRD (Yup, RHD Australia)- 3" Exhaust, GDE Flash Tune, CRDSTU/SL Hybrid Lift & bash Plates, 4xGuard Rock Rails, Saguaro F & R Bars, RCV's, Warn 9.5cti-s, AEV Saverge Rims, Nitto Mud Grapplers, Snorkel, Custom Rear Drawers, On Board Air, BullyDog Monitor, Dual Batteries - [URL="http://www.jeepforum.com/forum/f67/valpacers-wh-build-thread-war-machine-1376368/"]Build Thread[/URL] - [URL="http://www.youtube.com/user/valpacer?feature=mhee#p/a"][U]YouTube Vids[/U][/URL]