First question - NP231 or NP242? How can you tell? Check the shift pattern - if there are two 4HI positions, it's the NP242.
Either way, there are vacuum switches that engage the lights - the transfer case itself is mechanically shifted. There is a vacuum switch, however, and what you check depends on the front axle (which depends on the transfer case...)
If it's the NP231, there's a vacuum actuator on the front axle (long shaft - pax side) that moves the slip collar to tie the inner and outer shafts together. This needs cleaning sometimes, I've just dismounted and worked carburettor cleaner thru it - there are two ports on it, and the light comes on and off when the axle is fully engaged or disengaged.
For the NP231 or 242, there is a vacuum switch on the transfer case itself, but I've not known it to need cleaning.
From what you're describing, I'm almost certain that you have an NP231, and I have the exact same symptoms on my 88.
CAVEAT - I do not recall if the disco front axle was eventually deleted entirely, so check for yourself before you act on this advice! TANSTAAFL/YMMV.
5-90