Ford Repair: Ford Explorer transfer case, borg warner, case transfer

Question
Dear Mr. Steve H I have a 96 Ford explorer V6 4.0. The Explorer has a switch for 2x4, 4x4auto &4x4Low.
For a year know, every time I used the 4x4, when disengaging it I heard a loud clunk noise.   
About a week ago I used the 4x4 to go to work. And after I came out of work I disengaged the 4x4 because the road was clean but after 5minutes the car started to tremble and became extremely ruff.  I drove home slowly for about 15 miles. When I opened a plug from the transfer case and inserted my finger I felt smal particles. And a small strip peace it;  of what looked like brass came out with my finger.  
So I assume that the transfer case needs to be rebuilt.
I think that somehow the 4x4 is permanently engaged.
Someone told me that what cased this problem could be that the transfer case motor might have gone bad.
Is there anything else that could have gone bad?
Could you please share your opinion with me?
And, is it possible for one to rebuilt the transfer case &transfer case motor at home one-self.
I asked around and I was told that this job could cost anywhere from $1,700 to $2,500 in the dealer.
I have done all the maintenance work in this car, my self and consider my self a handy person.  The only reason I am able to own this car is because it was given to me.
I can't afford to have the work done. So I am hoping that I can do the work my self.
THANK YOU VERY MUCH for your time and help.
Sincerely J Moscoso
J_Moscoso@hotmail.com  

Answer
Jay-

  Ahhhh, here's the funny thing about Ford's transfer cases...they can't be rebuilt.  The way they're sold to Ford (through a company called Borg Warner who makes them) is as a sealed unit.  The only way to get to the internals in almost every case is to cut it open.  This is a brilliant move by Ford since they charge more for a brand new unit rather than charge less for a rebuild.  As for the installation...it could probably be done at home, but you'd need to have some pretty decent automotive skills to get it done in a timely manner.  I think you're on the right path thinking it's the transfer case, but I'd call around and try to find the best price (which will most likely be through a dedicated transmission shop).  Hope this helps.

Steve