The way these things work: There is a long (main) shaft that connects the transmission input to the rear output, a short shaft that only connects to the front output, and a chain that connects the two shafts together. When the vehicle is in 2WD, the chain is disengaged and only the rear output is driven. When the vehicle is put in 4WD, the chain is engaged and both shafts are driven.
However the front and rear driveshafts are permanently engaged to the axle differentials, so both driveshafts always turn, and therefore both of the transfer case output shafts also turn. So if the vehicle is in 2WD then the front output shaft will still turn, and it will also pull the chain, but the chain will not be engaged with the main shaft so it will only free-spin inside the transfer case.
If you disconnect the front driveshaft and run around in 2WD then the front output shaft (and the chain) will not turn at all.
The point of asking you to spin the front output shaft while the transfer case is in 2WD and the driveshaft is disconnected is to see if the noise is coming from inside the transfer case. If the transfer case is in 2WD then it does not matter what gear the transmission is in since the chain will be disengaged from the main shaft anyway. If you still hear noise in this state, then the chain may be dragging on something, or another possibility is that the sprocket is partially engaging (such as a broken lockring that allows the main shaft to move around inside the case where it can partially engage the sprockets).
If you don't hear the noise while spinning the output shaft, then look elsewhere.
