Actually, it depends on where exactly the brown wire was cut to install the switch. There are actually three brown wires: One from the TOD relay, one from the TCS relay, and one from the splice between them down to the transfer case.
If the wire is cut between the TOD relay and the splice with the wire from the TCS relay, the switch you install will only disable the TOD in automatic mode. When you shift into 4 low, the TCS relay will still power the clutch coil in the transfer case.
If the wire is cut between the splice and the transfer case (i.e. under the seat) then yes, you are correct. If the switch is off, you will only be in 2wd regardless of whether the transfer case is in high or low range.
By the same token, you can use the same mod for the 95-96 to give it full-time 4wd high. Instead of breaking the circuit, you use the switch to manually apply power to the circuit and it will lock the transfer case in 4 high. (i.e. 100% duty cycle) Just make sure you use a switched source, or use a relay connected to a switched source so that you don't forget and leave the transfer case engaged overnight.
-Joe
-Joe