1992 chevy k1500 truck

You dont. It unlocks with a slide collar in the front diff and at the transfer case.
 
As kind of stated above, there are no locking hubs, but there is a central axle disconnect that splits the passenger side shaft, effectively "unlocking" the axle. On that truck the disconnect uses a thermal actuator to engage, they can have issues in really cold weather and also as they age. To go "manual", you can purchase a Posi-Lok unit to replace the thermal actuator and install a pull knob in the cab to engage the front axle:

http://www.4x4posi-lok.com/app_chevy-k.html
 
No worries! Just answering your question :beer:
 
As kind of stated above, there are no locking hubs, but there is a central axle disconnect that splits the passenger side shaft, effectively "unlocking" the axle. On that truck the disconnect uses a thermal actuator to engage, they can have issues in really cold weather and also as they age. To go "manual", you can purchase a Posi-Lok unit to replace the thermal actuator and install a pull knob in the cab to engage the front axle:

http://www.4x4posi-lok.com/app_chevy-k.html
The thermal actuator is pretty unreliable, but for about 1/2 the price (~$50 actuator ~$30 harness) as the posilok you can upgrade to the newer servo motor actuator used in the later trucks, it's easier to install, one less thing to do when you put it in 4wd, and is very reliable. Only benefit of the posi-lok is it allows you to leave 4wd disengaged in 4lo, gaining 2lo, but you could do the same with the actuator using a switch and relay.
 
the front diff stays locked even in 2wd
It's not locked, but I assume you meant engaged, then the actuator is frozen in the engaged position. Use one of the solutions above or just replace the actuator to restore it's function.
 
The 305 is less desirable, but it will work if you have nothing else. I'd put the 305 in and drive it while you rebuild the 350. You will need smaller injectors, knock sensor, and ECM for the 305 to run properly.
 
It still has injectors, knock sensors, and an ECM. The injectors are in the throttle body.
 
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