The easiest way to find out whether it is working or not is to take the drive flanges off of both sides of the front axle.
Put it in drive or reverse, and very GENTLY try to move up a slight incline. You should feel it slipping in the transfer case. There will be a groaning noise. DON'T OVER DO IT. The slipping and groaning is the clutch cones doing their job. You don't want excessive wear on them. A seconds worth of slipping will tell you they are working as they should be.
Now lock it in E drive. Do the same thing. This time it SHOULD easily drive away with no slippage, IF everything is working correctly. If it still slips, STOP, do not try to keep driving it. It's now time to figure out where your problem is.
You could also do the same thing as above by putting the front up on jack stands with the only the front tires off of the ground. Just feel for the "push" and be careful not to drive off of the jack stands if you do it that way. When you try to move, the power should go to the easy to spin elevated front tires in normal mode. When in E-drive, the power is locked 50/50 to the front and rear, and you will drive off of the jack stands.
You could be looking at a broken vacuum line to the switch of actuator. Switch hooked up wrong. Broken/frozen actuator. Or as I found, the clips on the shift fork on mine were missing, the actuator moved but didn't move the fork.
Or everything may be working correctly, and it's your light that doesn't work.