You want the hub of the wheel you're turning locked in anyway. Otherwise, it won't be turning anything inside the diff, and that's what you need. If you have auto hubs, replace them. They're no good to anyone that wheels.
Since you have auto hubs, I'm assuming you have what I'd consider a late model (anything 80's or newer is too new for me). This would also lead me to assume that you have a NP208 or a NP241. While I don't know as much about these transfer cases, I can tell you that a NP231 doesn't have a true neutral position. When shifted into "neutral" the front input is disconnected, but the front output is still coupled to the rear output, which would cause this problem of yours. This essentially means that the truck is still in 4wd while in neutral, but the tranny will not make it move. FOR THIS REASON, DO NOT FLAT TOW IN NEUTRAL WITH HUBS LOCKED. That's another reason to NOT have auto hubs, you never know what they're doing. Trucks with NP231's being towed with vacuum disconnect axles have had the cases literally explode into pieces under tow.
Anyway, if this is what your case is doing, then put the t-case in 2HI, and put the tranny in neutral. See where that gets you.