I think the light is to let u know u are in low range... been a long time since i have driven a liberty (mate had one) as far as the drive line goes I had a 97 impreza AWD didn’t have low range but I think they all ran on a liquid centre (viscous)
Btw the Liberty was great in drags as you could take off in low range then shift to high range on the fly doubling yr forward gears very few std v8’s could beat it
HTH
Mick


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