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The light is flashing because the transfer case did not switch to 4WD. This is usually caused by the transfer case shift actuator sticking. If you have not used the 4WD in a long time this can and does happen. I have on occasion been able to get them unstick by taking a rubber mallet and banging on the actuator on the transfer case. Use common sense when doing this to try and chart the drive motor loose to not destroy the actuator. This is kind of a caveman repair attempt but in order to do anything with the actuator and transfer case has to be disassembled to repair or replace the actuator. You could continue to rock the vehicle back and forth trying to get it to engage but normally this does not work that will work if it is stuck in for 4wd. This light can also flash when the front differential actuator is not sliding the ADD into position to lock the front differential.
Believe it or not I have had two vehicles that the actuator had stopped working. By banging on the transfer case and tapping on the actuator itself with a rubber mallet I was able to get the actuator to engage. If you have two resort to this method make sure that you engage the actuator while the vehicle is in a stationary position. Engage and disengage several times so that the motor will work and free itself up. All I know is that I was able to do this and save one customer the cost of the actuator and the disassembly of the transfer case. I realize it is an unusual repair attempt but it does not take a whole lot to try. Just make sure nobody gets run over while you're trying to get the system to engage.