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If putting the FWD fuse in stops the binding and gives you the FWD light, then solenoid C (transfer clutch) is working. However, it may not be working properly. In normal mode, it should be allowing partial transfer to the rear wheels, which will allow the transfer clutch to slip when needed, and only full transfer when the front wheels slip. I suspect you should be prepared to replace the transfer clutches as well as the solenoid and valve body.
Good luck!
Charl
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