Problem was a bad transfer case. Mechanic said it was full of metal shavings so I had him replace it. Shifts smoothly and quietly now. Also needed a new axle which was also replaced. Was advised to get new bushings and tie rod as well. He also reminded me of the missing stabilizer bar I had forgotten had fallen off. So I'll be getting shocks and tie rods soon and then I'll work my way down this long list of replacements.
97 Discovery SD will only drive when the Diff lever is engaged in 4 High. Whenever diff is in neutral the transmission will not engage in Reverse or Drive also if set to Park I can hear an awful grinding of the gears. Is this a diff issue or is it in the transmission, I want to be more certain before I take it to a mechanic.