The front axle actuator is thermal and they do go bad.
If the Xfer case is engaging, the front drive shaft should spin in 2wd and be fixed in 4wd if you are under the truck trying to spin it while the truck is stationary.
I'm trying to remember way back when the actuator went bad on my '95. I do believe that the 4x4 light would not come on when the actuator was bad.