Help...Tranny or Transfer case problem?

[djh96ranger]

My 96 x-cab, 3.0L, 5spd, 4x4 Ranger started Grinding when letting off the clutch only when I downshift @ higher speeds, or Violently jerks & bangs downshifting @ lower speeds & when I let off the accelerator.
It's got auto lock hubs & electronic shift 4wh drive. I jacked up each front corner & turned the tires individually... axles aren't turning.
I jacked up the whole truck and put it in gear... front axle is not live in 2wh drive. Put it in 4h... OK, 4l... OK (slow to engage).
The hubs do have the typical clicking in them... not too bad.
The truck upshifts fine, clutch engages fine but does have a slight "clunk" when putting it into gear.
Any ideas? I've got a good working knowledge of autos, but 4 wheel drive is new to me.

EDIT: sorry guys.... new to the forums thing as well. I didn't realize there was a transmission thread.

 

[The purple one]

I am having the same problem with my 4x2. I think it my be my rear end going (My wife always is telling me my rear end is making a noise )

 

[trail B2]

I would start by setting the parking brake laying beside not under the truck.Have someone put it in forward let out the clutch till it wants to move then backwards till it wants to move.Watch the driveline to see how much it turns before the truck wants to move and listen to see if you can hear rear or tranny mostly backwards let it move a little if it helps.