American Motors: 1978 CJ7, set of wheels, conversion kits

Question
I just purchased a 78 CJ and had a question about the transfer case. It has a 304 auto tranny. There are no locking hubs. There is a switch with the vaccum lines and i somewhat understand how it works but then i found out about these conversion kits now im lost. Thanks to a small leak it looks like transmission fluid in the case now but from reading ive found if its not a conversion there is a special fluid to use any info will help on how i can tell which is which

Answer
Your CJ has Quadra-Trac.
Basically, it is a conventional 4WD system with the addition of a limited slip center differential in the transfer case. When one driveshaft starts to spin, indicating a slipping tire, the center differential locks up to the other driveshaft, thus providing power to the opposite set of wheels.
The transfer case does require a special lubricant because of the limited slip center differential located in the transfer case.
The center differential is of the cone design.
Go to this sight:  http://www.quadratec.com/products/52250_99.htm
The switch you are referring to mechanically locks the center differential. This should only be done on ice or when all the tires are slipping.