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If your transfer case refuses to lock, you may be a leaking seal between the transfer case and actuator. The oil fills the actuator box and causes the sensors to malfunction.
Once the box is removed and the seals are replaced, this reinstall method reduces the chances or tearing the new seals you just installed.
Also, by opening the actuator case you can clean it out and re-lubricate it with white lithium grease.
Enjoy this video of a regular guy just trying to figure it out!
Tips:
1.) Pay close attention to the blue dial orientation. It must as shown in my video. Many online forums have better descriptions.
2.) The shaft from the transfer case must be all the way pulled out.
3.) The first time you open the actuator, be prepared for gear oil. Put something down to catch it.
4.) I probably should have glued in that little pin I dropped to make it easier.