Major trans problem

So, here's the deal:

This morning, I start the truck, and let it warm up for about 5 min before I take off for work. I put it in 1st and pull out of my parking space in my apartment's parking lot. I shift to 2nd to idle to the road, and WHAM!! my truck comes to a stop as I put the brakes on. I do all visual checks- no leaking fluid. I can cycle through all five gears and reverse with the clutch in. I can put it in any gear and attempt to let the clutch out, but if I do it slowly, all I get is the smell of burning clutch and it stalls out. I stalled it in ever gear trying to get it to move using different syncros, but nothing. I took it out of gear and rolled(read 'pushed') it back into the parking spot. What gives?:dunno: I know its a Peugot and I shouldn't expect a lot, but can anybody help me trouble shoot this? Thanks

Oh yeah- I forgot. Last week I looked at my trans fluid and it looked more like pea soup than anything else, so I drained the fluid from the drain plug at the back/bottom of the trans and I refilled it with generic sythetic 75-90w, figuring I'd change it out again in another 1K. I shifted like butter for the last week. I tried the transfer case, I can shift to 4HI, into N, and back. I didn't check 4LO.

(It's an '88 MJ, 4.0, 4wd, BA-10 trans)

Okay, here's what I've got. I just ran out to check something, as I was thinking about the t-case. I can shift the t-case through all gears. If I put the t-case in N, I can let the clutch out with the trans in any gear and it won't stall. I can hear the trans gears turning, especially reverse, you know, it always has that whiny tone. So I guess that means it's my t-case that's locked up. I've got a 231. Are all years of the 231 the same? Is it the same t-case as in an XJ? If I'm replacing should I go with the 242?

Certainly sounds like a locked up transfer case.