Manual Override
WARNING: This page is about a different car, the 2005 Ford Pickup, 2005 Ford F550 Super Duty, 2005 Ford F450 Super Duty, and 2005 Ford Cab & Chassis. However, it is still accessible from the selected car via links, so may be relevant.
The hub locks have manual override selector dials which, when rotated to the "lock" position, will keep the mechanism locked regardless of the transfer case shift lever position. Verify that both hublock dials are in "auto" before evaluating four-wheel drive operation.