This could be something a little more obscure.
In 1996 the slip joint out of the back of the transfer case was moved from the inside of the case, where it was lubed with gear oil, to the outside of the case. This slip joint was lubricated with a heavy grease that gets hard after a while. You can't directly see the slip joint as it's inside the boot right after the transfer case.
The fix is removing the rear drive-shaft, removing the grease, and applying "Loctite Anti-Seize Silver Grade", stock number 76732.
Make sure you mark the rear U-Joint before you take it apart. Also mark the splined shaft, and try to get it back to the same tooth. The metal clips holding the boot can be removed without destroying them, but if you do destroy them, they can be replaced with thick nylon ties. Make sure you clean out well all the old grease, and apply the Anti-Seize liberally. I cleaned the shaft using carb cleaner.
No amount of oiling the slip joint will eliminate this. Other componds were tested, and this exact anti-seize has worked well in the long run, don't substitute anti-seize compounds.