It grinds when it is in 4 hi, if the hubs are in, or even with them out. The 40 mile an hour thing is on the highway, and it is a need to get out of the way going down the mountain to keep a 18 wheeler from taking me out. I live in the mountains, and town is about 20 miles either way. I took the front shaft off, and run it in 4 hi, and it looked smooth through the shifter boot hole when I was running in 4. I can run with the hubs in in 2 wheel, and no noise. Thanks for the help guys. You can feel the ruffness in the transfer case shift lever, but if their is a vibration any where you probably would. I am thinking of taking the front output shaft of again, and check the bearing. Their was no sign of metal or dirt in it the first time.