1998 Discovery 1. I recently had to rebuild the entire upper part of the engine and that worked out just fine (PO had a blown head gasket and just kept on going despite all coolant evaporating). Engine runs great.

But, I also went down to the junkyard to grab a transmission and transfer case because the previous transmission was garbage and gears were all ground up inside the T-case. After putting everything together, I am now at that point where I try and engage the gears and move the vehicle.

When I shift from Park into, say Reverse, you can hear & feel the change in the engine as what it appears is the transmission is engaging. But, there is no movement in the vehicle as the t-case does not engage.

First, the interlock solenoid is not functioning properly. I cannot shift the High/Low gear. I am going to troubleshoot this and see if merely taking the solenoid out will fix the issue. My old transfer case the solenoid worked, and I just applied 12v to the solenoid and it went in and out. I am going to check the power at the plug for voltage while in park or neutral with the rig running.

My thinking on this is that either the solenoid is bad, which swapping or removing the solenoid is an easy fix as long as I do not do a soccer-mom High/Low shift at 80 mph, or the issue is something else.

And, that is the question: If the solenoid is bad or not functioning, will it lock out the transfer case completely so that it does not function at all or is the only thing it does is prevent the High/Low gear shift?

 

I removed my tcase solenoid for the same reason - it just prevents you from shifting the range under way. pretty sure you can get to it from the top in the tunnel opening in the cabin.
as you probobly learned rover tcase's leak - check the fluid regularly - mine is way overdue

 

Transfer case solenoid prevents shifting from high to low. It's still possible to lock / unlock center diff. Drove with bad tc solenoid for over a year.
Does the diff lock light up?