Grinding in 4wd

I have a 96 sport, 4x4, 5 speed, 95K. It has the NP231 transfer case. There are virutally no problems in 2wd, or in 4 low, but in 4wd high i expiernce a grinding when i downshift. I can up shift w/out the grind, but when driving in 4w hihgh a low noise can be heard. It grinds wheni shiift from 4th gear to 3rd gear. i had a tranny shop look at it, he told me $900 cuz he wante dto rebuild the transfer case. I found a master rebuild kity from jb conversions for $120, i know he was screwing me over. Right now its at another grage for another estimate. Here sthe problem though, the grinding seems to come froim the tranny when it grainds. but like i said it only does it in 4wd high. I assume it would happen in 4 low, but i only stay in 1st gear when using 4lo. Please help me!

Are you sure it's fully engaged? I find with mine ['90] that when I go into 4HI that sometimes it doesn't fully engage, and seems to give a bit of a grinding noise, but not in 4LO have I ever noticed it.
I simply put it back into 2WD, then back into 4HI, give it a bit of gas and it goes in. I can actually 'feel' it when it does fully go into gear.
Not sure if it'll help, but wortha shot, and no $$$$ spent finding out.