The most obvious thing mentioned in the diagnosis is that with the hubs locked you can spin the tire on one side and the axleshaft does not spin. This is an obvious problem and the first thing you should further investigate. Simply put the tire/wheel/hub is not engaging with the axleshaft. This typically means either the locking hub is installed incorrectly or the stub shaft is broken.
With a standard open diff this issue would make it appear the 4wd is not working at all since all of the power is being routed towards side that is not engaging, which effectively means zero resistance.
As a couple points of clarification, if you jack both front tires off the ground, lock in the hubs (which are actually working), and leave the t-case in 2wd. For an open diff, if you spin the tire on one side you can have the other side tire spin the opposite direction but the driveshaft (axle to t-case) will not move, OR the other side tire will not move but the driveshaft will spin. Just depends as the power will flow through the path of least resistance, and if you do the same thing several times you might get the other side wheel spinning one time and then the next the driveshaft will spin.
With a standard open diff this issue would make it appear the 4wd is not working at all since all of the power is being routed towards side that is not engaging, which effectively means zero resistance.
As a couple points of clarification, if you jack both front tires off the ground, lock in the hubs (which are actually working), and leave the t-case in 2wd. For an open diff, if you spin the tire on one side you can have the other side tire spin the opposite direction but the driveshaft (axle to t-case) will not move, OR the other side tire will not move but the driveshaft will spin. Just depends as the power will flow through the path of least resistance, and if you do the same thing several times you might get the other side wheel spinning one time and then the next the driveshaft will spin.
