Hope it isn't what I have.

http://www.subaru-svx.net/forum/show...threadid=16163

It could be:
1 worn out transfer clutches
2 What I have (broken transfer hub)
3 duty sol. C failure. (but it would probably throw a code)
4 broken rear diff.

Good luck. P.S. drop me a note when you go to tear it down. If you want to hear about my experiences. Mr.Pockets has some great posts on duty sol. C too.

-Pax