I'm fighting this same problem.
How do I know if it's the 4WD selector switch or the transfer case motor encoder ring?
Here are my details:
I have a 2004 Tahoe LS.
Two years ago, the 4WD switch buttons started acting up. It would light up red, like in neutral, then sometimes not go into 4-Hi, or maybe stay in 4-Hi and not go into 2-Hi right away. From what I recall, I disconnected the battery or something and the system reset and worked fine ever since.
Until this month. First, it wouldn't go into 4-Hi. It would only stay in 2-Hi. The red neutral light came on one time, but mostly it would just stay in 2wd, and when I'd push 4-Hi that light would flash for a while but it would never go into 4-Hi. It also wouldn't go into Auto (that light would flash, too, when I pushed Auto, and sometimes it would stay on Auto for a few minutes, but it wouldn't really go into Auto).
btw, when I start the truck, all of the 4WD switch lights come on, so I know they are good.
I drove the truck in some pretty good snow last week. While going through a snow drift, I pushed the 4-Hi button. It shifted into 4-Hi. And now it will not come out of 4-Hi!! It is stuck in 4WD.
I have read lots of forums about this. Here is what I have tried:
1. I pulled the TREC fuse for about a minute. The fuse itself is good. This didn't help at all. I've done this on two different occasions now. I also pulled and checked a bunch of other fuses.
2. I disconnected the battery for 45 minutes. It didn't help at all.
3. I pulled the dash trim and removed the 4WD selector switch. I took it apart to check for bad solder joints I could fix (per many forum posts I've read). I am unable to remove the circuit board from the plastic back of the switch (the pins go through the plastic and won't pull out). I'm assuming the soldering mentioned was on that backside, because there's not much to see on the front side. I reassembled the whole thing and put it back in. It still acts exactly the same. It is in 4-Hi. If I push 2-Hi or Auto or 4-Lo, they flash but it won't go in. Well, occasionally, it has always lit up the Auto light like it went into Auto, but it didn't really, and eventually the light goes back to 4-Hi. I have tried shifting while in Drive, while in Neutral and rolling, while and after backing up, also with the engine off, in neutral, brakes on--everything I've read to try. Nothing helps.
4. I am thinking about replacing the transfer case motor encoder ring. There is a good video of doing that here:
http://www.youtube.com/watch?v=pXa61y5pqz8&feature=youtube_gdata_player
Does anyone know if you really have to reflash the program? Another GM PIA.
So.....................
How do I know if it's the 4WD selector switch or the encoder ring?
I can't find the 4WD selector switch on NAPA or AutoZone websites. Anyone have the part number? The switch is on eBay (with multiple part numbers), but I'd like to buy it, try it, and if it doesn't help, return it immediately and buy the encoder ring (I guess).
I know some posts refer to a TSB and to reading the powertrain codes, but from what I've read the C0327 code basically just say "it's not working" and doesn't really tell you what to fix. Also that many posters say when they take it to a dealer, they are usually told it's throwing too many codes to help anything. Great.
If you have any thoughts, experience, advice on this, I would greatly appreciate it. We need this truck for my wife to drive to work, and I don't want it driven on dry pavement very long like this, or it will probably tear up the drivetrain.
Thank you.