Thank you for that YouTube video link; after the end YouTube offered me several "you might like" related ones, and this one has given me a tantalizing clue, especially at 3:30 where the narrator points out a "grub screw" ("grip screw"?) which is British for "set screw" in American:
(narrated, I believe, by "Mike" of Britannica Restorations -- KUDOS!).
My copy of "Discovery 95/98 Workshop Manual" does not item out this setscrew, but it's clear that the "High-low selector finger" must be bound to the "High-low selector [fork and] shaft" somehow, or else the high-low linkage will have no mechanical purchase upon the workings of the transfer gearbox, which is exactly what I am experiencing!
In other words, I'm betting a box of donuts that my setscrew has worked loose or dropped out, which which would explain both why the transfer gearbox got first into one bad intermediate position ("locked up" i.e. both H and L engaged") and later fell into another not-so-bad intermediate position (Neutral), and also why the H-L lever now "flops" with no effect. In fact, the narrator pointed out his "grub screw" was a bit loose, and at 5:15 he makes a point of applying Lock-Tite (thread lock compound) to the set screw during reassembly.
Fingers crossed, I'm waiting for weather above freezing before I take off the high-low assembly cover (held by 6 bolts), and I'll post results.

 

Well, I owe someone a box of donuts, I lost my bet.
The set screw or "grub screw" ("grip screw" lost in translation?) on the high-low linkage shaft under the 6-bolt housing is NOT the culprit.
Instead the high-low selector fork shaft feels free, as if maybe the high-low selector fork has ITS set screw come loose.
Thrilling video on YouTube here: (hand-held camera bobbles not for dramatic effect; and I would have been more dexterous with the other hand!).
If anyone thinks I can get to the high-low selector fork without dropping the tranny out of the chassis, please encourage me.
Otherwise, links to transmission removal sincerely appreciated.