There should be a 3/4" water line going to the back passenger side top of the manifold... check your hose AND the fitting that screws into the intake manifold... most likely the culprit.

I can't help you out on the 4WD ops cuz I'm not too familiar with the 'newer' GW's ... I'm full-time 4WD with a BW1339 Quadratrac....no shifting, it's always there.

78 Wagoneer

14" total lift
4.89's/Lockers/39.5" Swampers
http://home.earthlink.net/~tjnkk