I have a 02 Explorer 4.6L with A4WD. I had a problem where my 4X4 Hi/Lo can't remember light was flashing intermittently, when cold. Ultimately a week or so later my transmission disengaged at a stop sign and I had to have it towed. I noticed that my speedometer would still register even though the transmission wasn't engaged. So I went straight for the Shift motor. You should be able to hear the motor spin with the Key-ON Engine Off, transmission in neutral and your foot on the break while alternately pressing the 4x4 HI and 4x4 Low buttons with the window open and radio off.
The shifter motor can easily be tested by removing it from the transfer case, locating the power pins and applying a voltage (12VDC) across the pins (the polarity of the applied voltage determines the direction the motor spins). Be advised that the 2 connectors at the 4X4 control module should be disconnected as a precaution and avoid touching any other pins as you might damage a sensor.
I wasn't able locate my problem, after reassembly the problem went away. But here is what I do know. The Dash panel lamps are illuminated under control of the PCM. What this means is the Lamp function is decoupled from the 4X4 Dash mode switches. On a properly functioning unit the Lamps illuminate only after the transaxle is fully engaged in the selected mode. That being said, the Shift motor has a gear encoder switch that reports the position of the transfer case gear cam. Mine just happened to have stopped in the (dealer installed option) neutral position which I don't have. I removed the grear encoder switch and Ohm'ed it out, not really knowing exactly what to expect. I spun it several times, the 4 internal switches all opened and closed but I don't know if there is a particular sequence to look foe (i.e. binary encoding). So back to the flashing Dash lights, it is the gear encoder that signals the 4X4 control module the state of the transfer case. So the problem has to be this gear encoder or the 4X4 control module, or a connection problem. Remember, the gear encoder is that sealed gray colored disk with 5 wires mounted to the shift motor and the connector from the 4X4 controller is exposed to the weather. The most likely culprit is the connector connection. To test the motor don't worry about disconnecting the sensors and all, just support the motor so as to releave the strain on the wires. If you can switch between auto and 4X4 High that is a good sign that your 4X4 control module is at least partially working, I would suspect a fues, the motor or the connector first. Also the shift motor gets it power directly from the 4X4 control module, this is due to the fact that it is a directional motor, these motors represent a significant load to the 4X4 control module. Just the motor drive circuit could be bad, which could be due to attemping driving a bad motor. So test the motor before replacing the 4X4 control module so that you don't blow the new one when you install it.