my .02
the shifter needs to be all the way back in 4hi lock which is towards the seat/console you dont have 2hi. The reason for this is because you have unlocking hubs on a full time 4wd transfercase, there is not a 2 hi setting. If by chance the truck did have 2hi, it would also have 2 lo which would be the unlock settings on the case. Example from dash to console:
full time np 203 stock:
4 lo loc
4lo
n
4 hi
4 hi loc
part time converted np 203:
4lo
2lo
n
2hi
4hi
if you put the case in any of the positions next to neutral, and your hubs are unlocked, you will get a spinning sound in the t-case and that means the case is a full time unit, see if you lock the hubs and it still does this. hth.