yo, WELCOME!
Have you tried shifting the tranny to Neutral or clutch depressed in manual tranny, then trying?
"If disengagement doesn’t immediately occur, a slight movement of the vehicle forward or rearward will usually cause it to disengage" by Ford
laastly, w/tranny in N or clutch depressed in manual tranny, turn engine off. Then turn it On and try again to shift Xfer case into N,
other possibilities;
1356 Manual Shift Wear; "...Manually shifted units usually exhibit wear on the selector shaft in two areas (figure 5). Shaft wear in any form will make the unit disengage or have very sloppy shifting. The star shaped end of the shaft where it mates with the shift cam is also prone to wear. Borg Warner released an updated shift cam with an Allen ***** to tighten up the fit and retain the manual lever. Look at the section of the manual lever that rides in the case, which is also subject to wear from dirt and two dissimilar metals in close contact...Always inspect the bore of the case for excessive wear. Figure 6 shows the bore is worn over size and will no longer hold the selector shaft in position. The only way to fix this is to do some machining and sleeve the bore, or to replace the case altogether..." (some figures are gone)
Source: by Mike W via web.archive.org @
http://web.archive.org/web/20030131161714/http://www.atra.com/gears/sep01/taming.html
1356 Manual Shift, No Movement or Neutral Position Tip/Saver Spacer & pic; "...Many 1987-1995 Ford F series 4x4 trucks and full size Bronco owners with 1356 manual shift transfer cases commonly complain of a "no movement" or an occasional neutral condition. This condition is usually caused by the linkage wearing the transfer case at its point of contact (1356 manual shift models only). Sonnax offers a case saver spacer 36605-01. This case saver spacer goes between the shift selector cam and the case and requires no special tools to install. The spacer moves the cam closer to the shift fork, thus preventing and/or eliminating: 1) one or both shift forks from becoming disengaged from the shift cam, 2) "slop"from the linkage caused by a worn linkage bore in front case half. This item is a specific size/thickness not commonly found in ordinary flat washers. This repair is quick, easy and a lot less expensive than repairing or replacing the case. Model: 36605-01..."
Source: by transmichigan.com