I just took my 04 Liberty to the OuterBanks last week.
Used the 4 wheel drive for the first time (bought jeep in Feb. )
Seemed like it was struggling a bit.Then started making grinding and clunking noises. When I got off the beach my transfer case was smoking.Put it back in 2wd and limped it home, still making noises occasionally.
Let it cool off , tried to shift it to 4wd and then back to 2wd, had to bang on the linkage to get it to go in 2wd. Drove it home to Ohio, no noises or problems.
I don't think it was fully in 4wd, rusty linkage and cable.
Afraid to try 4 wd. again, I think the transfer case might be toast.