NP 205 Problems???

[1quik70]

I just picked up a 71 SWB 4x4, 454/TH350 combo, and had it shipped home. Once I started drving the truck I realized it had a tranny issue, it was shifting so hard it was border line violent. I narrowed it down to the modulator, and bought one to replace it. Yesterday heading to work, the truck shifted into 3rd and made the worst noise. It sounded like something in the transfer case let loose and is now moving around and grinding inside of it. The noise sounds like chain slop, but being there isnt a chain in this beauty, it can't be. It still shifts in and out of 4hi and 4lo no problem, and the truck still pulls hard through this, so the trany is out of the mix. The noise is definately in the transfer case. Any of you guys had something similar happen? Im going to pull the PTO cover tonight and see what I can see, but I've never messed with 4x4's?? Any advise or help will be much appreciated!