You're going to need to get under the car, at least partly for these tests, so try to find a dry place or at least a mat or similar to lie on.
Put the car in park, engine off, hand brake on, chock the rear wheels, jack one front wheel off the ground, preferably the right one (because this gives more clearance to reach the drive shaft) and secure the vehicle with jack stands. If it's a manual transmission, put it in either first or reverse, and select 2H on the transfer case shifter.
Reach under the car, grab the front drive shaft (from the transfer case to the differential) and try to rotate it - it should turn, possibly with some resistance - now select 4H, and again try to rotate the drive shaft - this time it should not rotate - it may turn slightly before locking in, but it should lock within less than one quarter turn, and you should not be able to turn it after that - if this does not happen, there is a problem in the transfer case itself.
If the drive shaft does not rotate, let's move on to the front differential free-wheel clutch.
Select 2H on the transfer case shifter and then very carefully, switch the ignition on, but do not start the engine - now select 4H, you should hear the pump run for 1~2 seconds and the green 4WD light should come on - next try to rotate the wheel that is off the ground - you should be unable to, as before it may rotate slightly before locking in, but it should lock and not rotate - if it rotates, there is a problem with the freewheel clutch setup.
Look under the front differential, you should see a rubber hose linking the axle assembly to a pipe running along the crossmember - follow the pipe back along the crossmember and forward along the chassis rail - it connects to the freewheel pump module - disconnect it from the module - if the ignition is still on, the pump should turn on and run for 10 seconds before turning off - this would indicate a working pump module and that the fault lies in either the plumbing or the differential clutch assembly - you can determine which by disconnecting the rubber hose under the diff.
Here's how the system works...
When you select 4H or 4L, a selector hub moves to engage the front output shaft and a switch on the transfer case sends a signal to the 4WD controller (on a 2000, this is most likely to be in the PCU) - at this point, the front output shaft should be turning (assuming the engine is running and the vehicle in gear), and the front output shaft will turn the front differential via the front drive shaft. Once the 4WD controller sees that 4WD has been selected, it turns on the pump, which pressurizes the freewheel clutch actuator in the differential and engages the freewheel mechanism, supplying power to the front wheels. Assuming that the actuator is airtight, the pump will build pressure in the system (about 6~9 psi) and this causes the pump to switch off and send a signal back to the controller that turns the light on. If there is a leak in the system, the light will either flash or not turn on.
It is possible - if the clutch mechanism is stuck - for the actuator to build pressure and turn the light on, with out engaging the freewheel clutch, but it is not very common, and this is where the problem lies it will mean pulling the front differential assembly and opening it.
