For some reason, I have noticed that when I try to switch from 4WD back to 2WD on the fly, travelling at under 60mph, it won't go back to 2WD.  The 4WD lamp is out but I can still feel the front wheels being driven.  It only finally switches back when I come to a complete stop.  This is irritating especially when travelling on the express way!

I'm going to see if I can find some answers on Mitchells and Identafix tomorrow at work but any input on this would be greatly apprieciated.  I can't help but wonder if something was not put back together properly when the wierdos at the dealership took my transfer case apart when trying to diagnose my rear axle noise before I told them to just replace the whole rear diff...

First - why would you be switching between 2WD/4WD on the expressway?  What you have is a part time 4WD - not AWD and it's not meant to be used in 4WD on the pavement - sooner or later you WILL break something.

Second - what year of XL-7 is it - it does makes a difference - there are two different styles of transfer case and two different styles of front axle.  It's possible that the problem lies with the front axle (which has a pneumatic frewheel setup) rather than the transfer case.

Are your tires mismatched or worn unevenly?  This could cause just enough tension in the drivetrain that the front axle doesnt disconnect while driving.

I don't use 4WD on dry or even wet pavement for that matter.  I know how a 4x4 system works.  I do use 4WD when it it's snowing at a considerable rate, including on express ways where I get up to about 50mph to provide better traction and control.

The system is designed to be engaged and disengaged at any speed up to 60mph according to the owners manual.

I am very well aware that I have part time 4x4...ha ha, being a Suzuki enthusiast since 1993 and having driven my 1991 Sidekick for 14 years straight, I have any idea of how the system works.

It's a 2002 model year XL-7.

Are your tires mismatched or worn unevenly?  This could cause just enough tension in the drivetrain that the front axle doesnt disconnect while driving.

Nah, they are all the same model of snow tire (tis the season!) running on a perfect alignment that I have done myself.