If, in 4hi/lo, with all 4 wheels off the ground, and in park, you try to manually spin the front driveshaft:
a) you can spin it -> something is wrong with the transfer case, from the encoder didn't shift, to the shift forks broken, or various gears, or the chain. Ie, the problem is with the transfer case (or before it, as in the manual shift lever or the electric button setup/wiring).
b) you can spin it -> good, the transfer case has shifted into 4wd mode (either hi or lo)
Now, block one of the front wheels so it can't spin, and try spinning the other wheel
1) If you can't spin the other wheel, or the blocked wheel winds up spinning -> excellent, you are in 4wd, and the front diff is locked, and the system is working ok
2) if you can spin the other wheel -> bad, something is wrong with the front axle being locked. In this case, you need to figure out if the actuator in the front diff in moving in/out as you shift between 2wd and 4wd. If it is, then something is busted in the front diff (generally the passenger side shaft, or the locking gears). If it isn't, then it might be the sensor in the transfer case, a wiring problem (between the TC and the front diff), or the actuator has failed.