I have an 01 w/5.3 liter. Last week as I came to a stop the truck lurched a coupler of times and made some grinding noises in the drivetrain. When I went to take off again I could hear a grinding noise, kind of like a brake dragging. I had my wife drive slowly as I walked beside it. There was a noise coming from near the transmission/transfer case. I had her stop and accelerate quickly. This made an ugly grinding sound. I trailered it to a repair shop, where they put it on a hoist to check it out. They figured the transfer case was shot since the output shaft going to the front wheels was turning when in 2wd (I am not sure if it is supposed to turn in 2wd or not). They had already ruled out one of the brakes dragging (they removed the calipers and the noise was still there). Anyway we decided to replace the transfer case with a used one. When I got it back yesterday I could still hear a noise like a brake was dragging, but the noise during a hard accel was gone. Now when I go to 4H the 4H light blinks a couple of times and goes back to 2H. I brought it back today and they said they were going to put the 4x4 actuator from my old transfer case into the new one because the computer might not recognize the new one???? I am not sure if they are telling the truth or not. Anyway I went to pick it up and they said now there are trouble codes coming from the transmission and the truck wont move in forward or reverse. But it will go into 4wd. Now they are trying to tell me my tranny is shot. I need help! Could the new/used transfer case be the problem? It supposedly came with a 30 day warranty. How could I drive the truck into the repair shop and two hours later the tranny be shot? I have had no other drivetrain issues with this truck. Sorry for the long post.