There are 2 AWD systems in the WJ. Quadra-trac has the AWD TC but open diffs. Quadra-drive has the AWD TC and Vari-lock diffs. The vari-lock diffs need friction modifier to operate properly.
It might be in the tcase. Some of then with awd have a viscous coupler in the tcase that will slip & make noise, esp when its going out. It keeps the front & rear from being locked in together all the time.