There is a boot, but I had the same problems,I just took some duct tape and used several small pieces that were easy to work with and covered the top where the locking ring is and then pushed the rubber boot down over to where its supposed to be and hadnt had any problems since.
The sheet seems to be a bearing surface that gives low friction while preventing ware of metal parts of shift lever and housing. Whithout the sheet the transfer case shift lever sets about 1/4 inch lower. Then the flat spot on the shift lever is not ingaged in the shift rods notches but a round section is in the notch. Then the sift lever can cross over to the hi/low shift rod's notch while still in 2 wheel drive locking up the transfer case. Lock up can't happen if the right parts have been removed from the transfer case.
There should be a lower boot to keep out water. Duck tape can help. Extending a vent hose above maxamum water level helps.