[THEFERMANATOR]

The light changing on startup would make me think tccm. The tccm reads the position of the transfer case via the encoder motor, then the tccm turns on the appropriate light. If it's changing, that would mean the tccm is either reading the encoder position incorrectly, or the encoder is bad. I seen dorman is now selling a replacement encoder because the whole assembly is so expensive, and the encoder's do fail semi often(the most common failure in that system is the encoder). As to repairing the transfer case, I've never been inside a np246. The only full time cases I rebuilt were the np242 and np249, but they were a much more basic viscous clutch system.