I had a similar problem with the 4whl drive engage lever on my truck. There is a RUBBER bushing at the end of the rod that connects the lever to the transfer case. The bushing split and the rod stayed on the transfer case but wouldn't engage/disengage. It's easy to find the problem by crawling under the truck from the driver side and following back from the transmission. The part is available but only if you buy the whole assembly. I don't remember exactly how much. I replaced the rubber bushing with a brass one that I modified to fit. That was several years ago and so far so good.
Last edited by LEW; 08-13-2012 at 10:08 AM.