Hey scram, sorry to answer so late but I was working a double shift and wasn't home for 24 hours.
From my experience with my NP 207, I cannot get it to shift into 4wd low the way they tell you in the owner's manual. I have to shift into 4wd high then give the Jeep time to get into 4wd high, making sure that the transfer case and the front axle have shifted; the 4wd dash light comes on. At this point the OM says that you can shift into 4wd low while moving slowly in gear (2 to 3 MPH). I've never been able to get into low range like that, even when the Cherokee was brand spanking new. Every time I tried it, it would grind. So what I do is: shift into 4wd hi, then stop and shift the transmission into neutral, keeping my foot on the brake (my XJ has a TF 904 3 speed auto), then shift the t'case into low. After that I've always gotten into 4wd low.
Your NP 242 might have to be shifted into part time 4wd hi first before you try to shift it into low. It seems reasonable that the easiest mode for the t'case to shift into from 2wd would be full time 4wd hi.
You can use 4wd full time off road without damaging it, unlike using a part time 4wd on dry pavement. In off road situations part time 4wd, especially with a locker in the rear axle, would be much less likely to get stuck and would be able to dig itself out should it get stuck. For this reason, the part time modes are a much better choice. That way, you are certain to get 50% of the available torque to your locked axle. In full time, if a tire on the front axle is spinning, then the front axle will get all the torque and you'll spin your fronts and the locked rear will just sit there, useless. Remember that in full time, the 242 transfer case open differential acts just like one in an open axle. In part time, your 242 locks the front and rear driveshafts together, just like a locker locks the two axle shafts together.
Let me tell you a story. About 3 years ago during a snow storm, I came upon a woman and her son trying to get a beautiful 1998 Jeep Grand Cherokee with Select Trac (NP 242) out of a paralell parking spot. The woman was behind the wheel gunning the engine and the kid was out of the Jeep by the rear axle, throwing salt under the rear tires. The rear tires were spinning and whinning big time. I couldn't stand seeing a Jeep abused like that. So I stopped the woman from spinning her wheels and asked, "Are you in 4wd?". To this she replied yes and pointed to the t'case shifter. The Grand was in full time 4wd high. I told her to shift it into 4wd part time hi and slowly pull out. Well, they couldn't believe their eyes, the Jeep came alive and walked right out of that spot. After she got out of the spot , she thanked me. I told her to shift it back into full time. The reason is that Grand's rear tires did not have traction. The open diff in the 242 naturally sent all the power to the slipping rears. When she shifted into part time, now the fronts, which had grip, were getting half the power and were able to pull the Grand out until the rears could find traction of their own. Now, while out on the highway, let's say you ran into a black ice patch. In part time 4wd, both front and rear axles are locked together. If all the wheels lose traction suddenly, the part time system sends power equally to each spinning axle. The gyroscopic effect of the spinning tires cause the Jeep to go sideways without steering control, a pretty dangerous situation. In full time 4wd, you won't get the gyroscopic effect.
I hope this long winded reply helps. /wwwthreads_images/icons/smile.gif