Sounds as if it is working how it should. Why are you trying to get it to kick gravel in 4H anyway? If you really wanna see or hear if your 4x4 is working maybe try a un paved dirt road with a decent grade somewhere on it and come to a dead stop. Proceed in 2wd and notice tire spin and then lock it in 4x4 and I bet you can tell the front end is engaged and pulling.I have a 2004 SE and my 4wd light comes on when I start the truck but of course goes off right after that. When I put it in 4wd high I can feel it engage and working especially when I turn but can't get it to spin a front tire in the gravel. My dash panel next to my gears shows that it is in 4wd. When I put it on 4Lo the light comes on on the dash as it should and it works great. I have no "slip" or any other lights on on my dash. Any thoughts?
If you have never serviced the transfer case it is highly advisable to do so as soon as possible. The fluid that came out of mine the first time was sinister.
There is a control module in the passenger side of the tk that has a alarm on it that buzzes quite annoyingly if the 4x4 fails to engage, along with flashing 4x4 light and incorrect indicator by the odometer.
Also check both your front axle flanges and confirm that they are both fully in the differential and that neither has popped out. There are a lot of threads and problems related to these popping out of the front differential but I do not think you have this problem.