per the BWM thread "The '97-'01 model years lack a true 2 wheel drive option. With a live front axle, there are no significant mileage gains to be had by driving the rear wheels alone. That being said, some of us simply prefer to determine when the front wheels should drive and when they shouldn't, instead of relying on a computer to make that decision for us."
the reason why 4406 v8s get better mileage is because the AWD 4404 tcases take alot of energy and lsoe lots of power to always run. as such, 4406 v8s get no better mileage than out 4405 v6s, just better than with the awd. as such, if you compare a 4406 to a 4405 v6, it shall be no different (well mayeb 1 mpg difference due to the v8 having 2 extra cylinders, but no more or less mileage loss due to treansfer case)
now the CAD can get you more mileage, as there is no more power/mileage lost in the front axle, as it is fully disconnected. you will, however, lose some reliability, as you are relying ont he vacuum globe thing to work all the tome.
and the 4A always running is a misconception imo, as all 4a does is keep it in 2wd, and when wheel slippage is detected, it puts it into 4H until the slip is gone. so what 4a always does it monitor for slippage, but until there is slip it is always in 2wd. no power split like the v8 4404 tcase.
all the 1354 will do is get rid of the paper based (according to wikipedia) transfer case clutch (iirc) in favor for the more robust chain drive system. there are no mileage gains to be had with the 1354 swap, only simplicity and relibility
someone correct me if something is wrong
TLDR: why v8s get better mileage due to 4406 is due to the AWD being inefficient, not the same situation with our 4A, which is in 2wd 99% of the time.
edit: quote from another thread "4WD Auto/Control-Trac = 2WD unless truck detects slippage between front and rear wheels. When slippage is detected, truck starts engaging 4WD clutch in transfer case on and off quickly to send power to the front wheels as well. Clutch is cycled instead of just engaged continuously to allow for front wheels to travel further in turns on dry pavement without binding up the driveline, due to a lack of center differential. Duty cycle (time clutch engaged vs time clutch disengaged) varies - with lots of slippage between front/rear wheels, clutch spends more time engaged. As traction improves, clutch spends more time disengaged."
all it does is throw it in 4h when there is loss of traction, then take it out of 4wd when traction is regained. afaik (and i might be wrong) the clutch does not have partial engagement, like a manual tranny, its either in 4h or 2h or 4lo... perhaps someone can confirm or refute this!