I couldn't fiqure out from you post if your vehicle was auto or manual. The clunk you hear when changing gears is probably the transferbox input gear spline is worn. This is a fairly simple fix on Automatic cars, but all the same it MUST be fixed. If however your vehicle is manual, it is not a quick/cheap fix as it normally requires replacing the 5-speed gearbox!
Before you go tearing into the transfer case, check that rear axle & A-frame bushings are not the cause first.