Here is a good look at the Tcase output flange nut being waaaaaaaaay out of spec >

 

Oh the Transfer case? I was thinking Torque converter.. Ok, I will check the Transfer Case tomorrow..

What fluid would I use and how do I know if it is full? Is there a way to drain and replace??

 

75W-90 Gear Oil

Also useful (just skip to 2:40) > How To Perform Differential, Transfer Case And Axle Service On Discovery 2

 

That sound of the loose nut in that video sure sounds similar to me!

 

Also if you're leaking red fluid, that's transmission fluid and that needs to be addressed too. There's no dipstick to keep an eye on the level and when it gets low enough to be below pickup level... Again, you'll be in for a new transmission.

 

Does the Torque converter share fluid with transmission? can I keep filling it to maintain it for now?

 

I think you mean does the Transfer Case and AT share fluid, and the answer is no. Different fluids as well.
The torque converter is inside the AT.

 

No, I was meaning, if I have fluid below the torque converter, will it run dry or does it share with the transmission.. I found this answer..

How does the torque converter work?
The torque converter is, essentially, a fluid pump. It shares fluid with the transmission that is pumped outward toward the outside of the torque converter. Inside is the torque converter is an impeller. This impeller is not unlike a small fan that uses centrifugal force to pump the transmission fluid. The impeller faces the turbine of the engine. The faster the turbine spins, the faster the impeller spins and, subsequently, the more torque transferred from the engine to the transmission.

 

Thanks for that Idea! I checked and all mine are solid

 

Just a headsup, the TC output flange nut should be torqued to 109 ft lbs.