It is probably the four wheel drive selector shaft is sticking, although it could be a broken spring (not  likely as the four wheel drive is working in high). With four wheel drive working in high, and the yellow knob appearing to work normally, I cannot visualise how a problem with the actual internal linkage could exist. Selection of four wheel drive is spring loaded, so if the dogs are lined up the lever can still go into low, but this means that if it is sticky, it might not go. There are actually three springs involved, and you may have trouble working out exactly how the mechanism operates, even reading the manual.
Remove the dust cover on the front and check whether the four wheel drive selector shaft is moving when you select low range, and that it is not rusty and hence sticking. Also check that the low - high selector shaft is travelling the full range, as if it is not, it may not be putting enough pressure on the front drive selector. A slight possibility is that the pinch bolt on the high/low selector fork is missing allowing the fork to be in the wrong place on the shaft, but I can't imagine it staying in the wrong place and allowing high and low to be selected.
Failing this, it will mean removing the front output housing to find the problem.
John
				
			 
			
		 
			
				
			
			
				John
JDNSW
1986 110 County 3.9 diesel
1970 2a 109 2.25 petrol
			
			
		 
	
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