I finally got the transfer case on the floor and at first was puzzeled as to what broke at Cloverdale because I could spin one shaft and the other 2 would spin also, then I noticed a little wobble as I spun the rear yoke but I couldn't pull it out so the output shaft wasn't broke as I had thougnt. So I took the inspection cover off and couldn't find anything wrong inside. Hmm, now I'm puzzled so I do a quick check of the front and rear axles and they seemed ok. Then I took the rear yoke off the xfer case and the rear bearing retainer and this is what I found.
<a href="
" target="_blank"><img src="
" border="0" alt="Cloverdale carnage"></a>
<a href="
" target="_blank"><img src="
" border="0" alt="Bearing failure"></a>
When time allows, I'm going to remove the rear cover to see if the cast housing is broke. I'm guessing something caused the bearing to fail, and the torque applied was allowing enough flex to break contact between the idler gear and rear output gear.