Do a search of this forum and others and you will find some stuff - look at my posts around late April - to the end of May and you might find something as well.
The short answer is - the problem only applies to 98/99 models with the original Intermediate Reduction Drive (IRD) - (transfer case). there is nothing actually wrong with the Transfer side of the IRD it is the overall effective diff ratio of the front wheels that is the cause of the problem.
For the viscous coupling on the rear drive to work, the input shafts and output shafts must turn at different speeds - in simple terms the fluid then becomes thicker and locks providing 4wd. Some people have said the fluid thickens with a sudden increase in temp, others have said it thickens when there are shear forces applied to the fluid - not actually sure which it is but it doesn't matter.
So for the VC to lock, the front wheels need to slip first - it takes a little while for the VC fluid to lock. Hence a car could lose drive before the the rear wheels engaged.
To get around this problem most cars with VCs have a slightly different effective front diff ratio to the rear diff ratio and as such this causes the VC to bind slightly so that when the front wheels do slip the VC locks almost immediately and drive is applied to the rear wheels. You may have heard of cars like the Freelander that has 10% of torque going to the rear and others like subarus may have 25% to the rear.
The trick is to only put in the right amount of difference in the diffs to cause the VC to bind but not lock up in normal use.
In the 98/99 freelanders the difference was too much ie the front diff ration was wrong which caused the VC to bind up too much (but not enough to lock). As the VC was always working hard after a period of time (somewhere between 100,00- - 150,000 km) the VC would fail and lock up. The result was transmission windup because there was no differential effect between the front and rear wheels. The weakest point is the bearings and gears in the IRD taking the drive to the rear. (in my car I could still drive around in 2wd with the tail shaft removed). The IRD would fail and the rear diff could be damaged.
It would seem the original IRD and the original rear diff were marginal as far as bearing strength was concerned.
From 2000 on the IRD was strengthened/as was the rear diff and the front effective diff ratio was changed to bring it closer to the rear diff ratio. Since this change there is no common history of VC failures, IRD failures or rear diff failures (they of course may happen but are not related to earlier instances). Also if you order a new IRD for a 98/99 the problems are fixed.
The IRD cannot be cost effectively rebuilt and most of the parts are not available. Some have been rebuilt but the overall concensus was that it was not worth the cost and effort.
If you do a google on viscous couplings you will find heaps of information on these things.
Hope this helps
Garry
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