Yeah, it sounds like the range slider is loosing engagement, which is likely worn fork pads, and probably there is some ovalling in the soft magnesium case. Turns out, the magnesium proved to soft for this application, particularly at operating temperatures. It's a pretty easy fix, what re-builders are doing, is putting sleeves in the case halves, upgrading the fork with the SONNAX kit, and of course replacing the slider, pads & seals to start with, a new cam is good too, and you want to look real hard at the main shaft, it can get beat up a little, but if you notice how the slider is annealed right where it engages the main shaft, and is therefore sacrificial in a sense (main shaft $130, slider $40). So the shaft can withstand a good bit of that grinding you hear, the slider on the other hand will not, and HAS to be replaced.
Let me try to outline the crux of the matter...first, ALL movement in high range is driven through about three dozen tiny ramped teeth, which engage less than a quarter of an inch. Yes that's right, there is nothing else. Very minimal engagement in high range, with neutral just millimeters away. Second, the magnesium case is so soft that tolerances open up easily, and a little stacking on top of that Zzzzzzzzwwwhiiiir bang. Low range is very solid, engaged deeply into the planetary, so if it pops on you, go to low to get to safety.
