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Transfer Case Shudder or Binding

WARNING: This page is about a different car, the 2004 GMC Sierra and 2004 Chevrolet Silverado. However, it is still accessible from the selected car via links, so may be relevant.
Transfer Case Shudder or Binding

Cause Correction
DEFINITION: When in the AWD mode, a shudder is felt during acceleration or a crow-hop or binding while turning, which may cause tire scuffing.
Review the Symptoms - Transfer Case  and perform the necessary inspections.
Oil breakdown or contamination Flush the transfer case and fill with the correct fluid. Refer to Transfer Case Fluid Replacement .
Incorrect transfer case fluid Flush the transfer case and fill with the correct fluid. The active transfer case uses a blue fluid. Refer to Transfer Case Fluid Replacement .
Burrs on the clutch hub slots
  1. Inspect the clutch disc tab slots in the clutch hub for burrs or notches. Refer to Cleaning and Inspection in Transfer Case - NVG 246-NP8 Unit Repair.
  2. De-burr the hub slots. If the hub slots are excessively notched, replace the clutch hub. Refer to Transfer Case Disassemble and Transfer Case Assemble in Transfer Case - NVG 246-NP8 Unit Repair.