4 wheel drive not working

I have a 1996 Chevy Suburban K2500 7.4L 454 4X4 with 217000 miles. Originally, driving the truck to about 40 mph would appear to slip into neutral, while the speedometer kept climbing. Stepping on the gas made the speedo go faster, but the truck did not. Once you slowed down to about 20mph, it would make a very disturbing sound like it was slamming back into gear, and you could accelerate again. At first, you could engage 4WD and it would drive up to 70mph without slipping at all. It has deteriorated to a point that driving in 4WD does the same thing now. I didn't think it was the transmission, because it drove fine in 4WD for a long time, so I suspected the transfer case. I have inspected the transfer case, and the chain and gears seem to be in good condition. I was told it could be the TCCM or the transfer case mode fork or pads. The pads are a little worn and chipped, but is that sufficient wear to cause it to act like this? What is the function of the TCCM in this process? Where is the TCCM located? I was told in the door panel, and under the steering column, but haven't really located it yet.
What further steps can I take to troubleshoot this effectively?

Originally, the problem was ONLY in 2 wheel drive. I drove a thousand miles in 4WD without a problem ever. I was able to pull a 30ft. Trailer in 4WD for 80 miles at 60mph without the trans slipping once. Only until recently, does it do it in 4WD. Is it at all possible the transfer case is slipping into neutral? It has a shifter on the floor, not push button shift. 4WD low seems to be OK still.

Its a 241 C transfer case, and the mode fork and rod look fine. I want to think that putting it in 4WD affected the tranny in a way that it didn't slip at first, but has finally caught up with the 2WD problem. I would have a warm fuzzy feeling if I knew the tranny would act differently in 2WD then in 4WD. I believe I have a 4L80E tranny, and I would like to know if there would be a better choice for a tranny that might give me better mileage, since I don't really need the 10,000 lb towing capacity anymore. I read a Bowtie Overdrive 700R4 might be suitable.

My '93 chevy suburban 4 wheel drive aint working. It just stopped working one day while engaged in 4 wheel drive. It has been working just fine then all a sudden it stopped. This happen before then it decided working again. We checked the fuses there fine, the floor shifter works fine, but it just wont engage. Solutions?

Its automatic with the shifter on the floor

Transmission problem
1990 Chevy Suburban V8 Four Wheel Drive Automatic

When I engage the 4x4 it seems to be binding up before the wheels can even make 1 rotation. It's almost immediately. The truck has a 6" lift but worked fine before.I put a front driveshaft spacer in today but the problems still exist.

I did have the rear-end replaced by a mechanic. He said it was the same 342 gear ratio.I guess I need to climb back under and take a look at the stamp on diff.