It sounds like the transfer case is over-full It should not run out when the fill plug is removed. It should be 1/2 - 1 inch below the level of the plug when full. An over-full case may do what you described. I have never experienced it myself. Drain some gear lube out, and see if that helps any.
addition: Your speedo. housing has seals inside of it that should keep this from happening. These seals may be original? If so - the housing either needs to be rebuilt(replace worn out seals) or replaced. Try draining some gear oil first, though. That may solve the problem.
Last edited by 54TOW; 03/20/2008 3:19 AM. Reason: addition
