4 Wheel drive not working

I own a 1997 ford f-250 HD with a 7.3L turbo diesel and 303,000 miles on it. It starts up and runs great. But recently when I engage the four wheel drive (manual locking hubs) and the front wheels start to spin, they have power going to the for a second and then I hear a clunk underneath the truck. After the clunk the front wheels no longer have any power and just the back ones spin. Then I stop the truck and if I try again the same thing happens. The 4wd light stay on when I have it in 4wd and goes off then I put in in 2wd so thats o.K. I'm guessing the problem is in the transfer case but not sure. I'd like to fix it myself so if anyone could help me out with any advice or answers to this problem i'd appreciate it. Thank You

I have a 1991 Ford F250 with the 351 Windsor. It has the original automatic lock outs. When I try to engage the 4 wheel drive it jumps in and out of 4 wheel drive, it sounds like something is spinning and not engaging. Prior to this the 4 heel drive has been trying to engage at around 45 mph. There is a grinding noise and vibration but after lifting off the accelerator it goes away. Any idea what may be causing this problem?