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The Hill Descent button might be on, but I'm pretty sure that only "works" while in Low range.
Obviously try moving the Shift lever into Neutral, then seeing if the High/Low can move into Low, and then try again in Drive, but while barely moving forward.
Sounds like your interlock solenoid is INOP or your cable is frozen. Both will be a PITA to get working smoothly. The cable isn't very easy to gain access to unless you get to it from the top & can get the nozzle of the lube into the actual sheath of the cable.
Interlock Solenoid is mounted directly to the transfer case. It's easier to gain access to if you remove the rear drive shaft, and remove the ebrake drum assembly from the transfer case. Then you can run your hand up the back of the transfer case and feel a little housing with a wire coming out of it which is held into place by 4 8mm bolts. You can remove it with a little patience from under the D2 and either replace it, bypass it (not the best idea), or install a blank steel plate in it's place and get yourself the 4WD Selector setup out of an 03 which will have the interlock solenoid on the actual linkage vs on the transfer case. I did that with the exception of using an 04 linkage so I could use the CDL function on both my D2's.
If your cable is truly seized then grabbing an 03 linkage is a good idea and bypassing the transfer case mounted interlock is an upgrade in my book as they do eventually fail (when it fails gravity holds it down preventing you from shifting 4hi/n/4lo) leaving you stuck in whatever you were last using before you needed to shift it.
Isn't the high/low range shifting a completely mechanical linkage; i.e. no cable? Pretty sure that the cable linkage is for the CDL lock on the 2004 model.
Hill Descent does only work in low range, so if the light on the dash won't go out then either you're already in low, or something is really messed up somewhere. Moving the range lever into neutral (try doing it when you're rolling very slowly and the transmission is in neutral) should made the light go out.
If one checks the owners manual you have to be moving between 1-5mph to change from hi to low or vice versa. If it doesn't change then there is a rust problem with the linkage.
On a D2 the 4hi/n/lo is cable actuated. On 04 D2’s they also added a cable actuated linkage for two cables total (4hi/n/4lo & CDL) D1 is mechanical vs cable actuated, however both will have an interlock solenoid on the transfer case itself towards the back. 03-04 had th interlock removed from the TC all together and placed on the actual cable shifter assembly.
If one checks the owners manual you have to be moving between 1-5mph to change from hi to low or vice versa. If it doesn't change then there is a rust problem with the linkage.
The sticker even says it, but sometimes it just doesn't make sense.