Man, this brings back alot of memories for me. I first started wrenching around the same age as your son. My dad helped me buy an 86 K5. He guided me through doing brakes, and tune up type stuff. eventually we got to the point where we were re-gearing the axles, and suspension upgrades. That's how I cut my teeth in square body trucks. Cool to see this tradition still alive and strong.
My son hasn't caught the bug yet, but he is only 12. I hope he will catch the same bug I did.
as far as the 208 goes, I don't have much experience with that X-fer case. I'm assuming you already checked the usual suspects like linkage bushings and pivot points? Internally, Im sure there is some sort of selector fork that might be worn out. But if your going that far into it, might be worth it to pick up a full rebuild kit.