The history:
I have a 98 ford explorer 156k miles. V6 automatic AWD w/ 4WD. I recently took it in for a rebuild on the transmission due to 3rd gear slippage. When I picked it up (after business hours) the dashboard lit up like a christmas tree with code lights about 4wd & OD. It drove fine and I needed the vehicle so I took it and called the mechanic the next day. He advised me if they did something wrong they would fix it but he would have to run the codes to know what was going on. He told me if it drove fine it was ok to take my time about coming in. Since it was an hour drive (and time off work) I waited till the following week. They ran the codes and determined that they had forgot to "plug my 4wd in" and it was throwing every code possible for that system. Lol...

The problem:
During the week I drove it I noticed a distinct grinding / chunking noise when I punched the gas hard at any speed in any gear. It happens about 85% of the time and is sometimes light noise and sometimes very bad.
I knew previously that I had bad ball joints so I figured it was that issue making a grinding noise based on the truck rocking back when I gassed it hard.
After about 2 weeks of hearing the grinding occasionally, it gets to bothering me so I go get the ball joints fixed. New ball joints and it still grinds... Now Im really worried it the transmission so I go back to the transmission mechanic yesterday (another half day off work and hour drive) and he test drives it. Tells me it is the transfer case going bad. Also tells me it wasnt like that when I picked it up because they 'test drive' every car after the work is complete (but somehow didnt notice the flashing codes on this test drive).

The question:
Is it possible that my 4WD being unplugged for a week or so of driving could have caused an issue in the transfer case?

Is it possible that if the 4WD was 'unplugged' the AWD may have also been disengaged and as a result caused an issue in the transfer case?

Is it possible while rebuilding the transmission or installing it, that they damaged the transfer case?

Are these systems connected directly to one another?

Is it likely that its just normal wear on two closely related systems and I should just suck it up and get it fixed?

any advice would be greatly appreciated.
many thanks.

First, the AWD and 4wd are one and the same. I personally am not familiar with working on AWD, as they are a shade different than 4wd in that the system is in essence availble all the time. You have to keep pretty much the same size tires on them to keep from damaging it. If it were a true 4wd system, then no, being unplugged would have no effect, but the AWD is intended to kick in in the event of traction problems, not wait for you to turn it on, so it is self activating. Many times this is done through clutches in the t-case, and if the t-case was unplugged, it might have kept it from engaging properly. However, do not take that as truth, because again, I am not familiar with the setup. Hopefully someone that is more used to them will be able to give an answer.

Without more diagnosis its hard to say. Its possible the case could be bad, but I'm still confused as to how the first garage determined the case was ok when they had it while it was unplugged.

Same mechanic both times. They didnt look any deeper when i took it back in because of the code lights. They ran the codes, saw it was throwing a bunch of codes for the 4wd system and assumed they had forgotten to plug it in. They put it on a lift and plugged in whatever it was but never tested the case because I assumed at the time the noise it was making was from the ball joints not the transfer case.

Problem could have been transfer case to begin with, not transmission.
You may still have the same problem as before.
Keep in mind, the transfer case has as many miles on it as the rest of the drive train, and probably NEVER has had the oil changed or checked.

With that being said,has anyone checked the oil level since the noise started?
Did the shop add oil back in after they installed the transmission?
I doubt the later if they neglected to plug in the electrical to it.