I've had this issue for a bit over a year in my '97 automatic. Whenever my shifter is in neutral, I get a constant "beeeeeeeeep" sound. It also happens when in park, unless I jiggle the shifter around and push the shift button in just the right way, then it'll shut up.

I'm assuming it's something to do with the transfer-case shift ****, which is currently in High and to the right (for street driving). I must confess, I haven't used the diff-lock yet after finding a clump of metal shavings when changing the T-case oil. I'm terrified of the darn thing seizing up on me and leaving me with an even bigger problem, so I avoid touching it. If someone can just tell me the source of that beep noise and how to disable it, that would do for now until I can get my T-case sorted out!

 

I'm 200 miles away from my Disco at the moment, but if you're hearing a loud beep/buzz, it's trying to tell you that it's not fully in gear. I'd recommend you try to shift it again, and move it fully to the low range on the right, drive for a bit like that, and then put it back to Hi/unlocked, to the bottom right where it sounds like it is now.

Mine gave me that noise initially after I mucked with the T/C lever and it was not willing to go all the way back in. There's something in the manual about it, but pretty sure it's just that the T/C is not engaged. If you do your short drive in high and unlocked (forward and to the right), you may warm it up a bit and it'll go in easier. I wouldn't worry about the shavings you found as you're better off doing this than not having it fully engaged anyway.

Not sure where I was in my travels when I heard, but I did end up replacing the fluid and cleaning all the gunk out of the shift mechanisms from underneath and my lever now works well. Moving slowly seems to work better than being stationary when shifting the T/C. Drive at 5mph, shift to neutral, then shift the transfer case, then shift back into Drive. Do this in a parking lot and stay away from the lock/left side when on pavement.