You're problem seems similar to the one I had. My truck is a 98 with the push button 4wd. When mine started acting up it would not go into 4hi, it would just blink and go back to 2hi. If you selected 4low it would put the transfer case into low range but not lock in the front axle (verified by putting truck on lift). I replaced the front axle actuator and that fixed the problem. My truck also liked to randomly disengage 4hi. I fixed that by re-soldering the pins on the back of the 4wd selector switch.