I've had the same issue with a new transfer case recently - the most reliable way to test is to drive hard circles on both loose gravel and also a hard surface - if it is engaged you will get windup. Mine wasn't engaging full stop.
It's a fairly easy process to adjust the diff lock lever to get it working...there are three positions it can be turned in: left, centre and right (or 10 o'clock, 12 and about 2 o'clock). The left position is a dummy one (for want of a better term), centre is disengaged and right in engaged. You need to adjust the pivot point on the linkage so that it travels from centre to right and back again. Also the difflock indicator switch sticks and can possibly be stopping it engaging fully if it is too far down.
A couple of helpful links I found when sorting mine out were:
Replacing an LT230 Transfer box - LR4x4 - The Land Rover Forum
Ashcroft Transmissions
Hope that helps!![]()


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