do you know if this transfer case was rebuilt or taken apart. I had this problem and thankfully found it before I put my body back on. The mechanic who rebuilt my transfer case installed the shift arms backwards. They do go in and the pins all fit but the base of the shift arm runs into the housing keeping it from shifting into gear. I had to pull the transfer case and remove the shift arms and just flip them over. Once done it shifted across the entire range of gears. Couldn't see anywhere in the tread if yours had been out or not.
No idea if rebuilt, 3 PO, and the last PO didn’t ask questions of that PO, to my frustration as I like details, but it was in decent shape and raging good deal, so I didn’t worry about it. Sorry, wish I was more help, mine wasn’t backwards, all positions looked factory to me, only custom mod was after bolting on shifter they welded it as well.