It's the transfer clutch. It can be replaced/repaired without dropping the transmission. About 2-4 hours labor depending who's doing the work. It's most likely that the clutch basket has actually sheered off as is usually the case if the C sol is working properly. I don't recall how much the parts are for everything, but so long as everything else is solid in the transmission, keep the auto and repair the AWD.
Hope that helps
