Look at it like this.
The red knob has three positions - High, Neutral, Low. 
The engagement dog clutch for the front prop shaft is engaged and disengaged via two springs. When the red lever is moved back into Low, front wheel drive is engaged via the spring (taking care of the situation where the teeth are lined up and would otherwise cause problems engaging Low). At the same time a selector shaft is moved, compressing a third spring and allowing the pin controlled by the yellow knob to engage in a hole. 
When the red lever is moved forward to high, front wheel drive is disengaged (via a spring, so if there is windup it will not immediately disengage). If the yellow knob is now depressed, the third spring referred to above engages front wheel drive.
The symptom you report, not being able to engage high without pressing the yellow knob, suggests one of the selector shafts is not moving freely. There are three of these, all protruding from the front of the transfer case extension, covered by a pressed metal dust cover which has the low range selector shaft coming though and connected to the red lever. Most likely the dust cover is missing or filled with muck and/or the protruding part of the shafts are rusty and sticking where they go through the housing. Usually just need cleaning up to free them. A workshop manual makes this clearer, but the mechanism is difficult to understand until the light suddenly dawns!
John
				
			 
			
		 
			
			
			
				
					Last edited by JDNSW; 4th January 2014 at 06:07 AM.
				
				
					Reason: spelling
				
			
			
			
				
			
			
				John
JDNSW
1986 110 County 3.9 diesel
1970 2a 109 2.25 petrol
			
			
		 
	
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