I think my wheel speed sensor is bad

Yes, it will. It compares the speed of the axle vs. speed of the car to know when to use the ABS. If the speed sensor is not communicating it will come on.

Ok so the 4 wheel drive won't engage the transfer case if I have a bad wheel sensor?

That's not what I heard. I thought the question was will the ABS light come on if the sensor is bad. However, if it's push button 4wd I could see that causing a problem as well. But, typically the most common 4wd not engaging problems I have fixed are due to a bad vacuum line to the transfer case. Is your speed sensor known to be bad?

I have code for right sensor fault. I replaced the shift motor last season and it has warn repacement hubs. Now when I put the selector in four wheel it doesn't go. Into four wheel drive.

lets start by replacing the wheel speed sensor, then clear the codes and get back to me. Thanks!