Big time center diff problems

[Tim Sexton]

Hello All,
    I just finished replacing the clutch on my 86 4000csq and now the
transfer case seems to be stuck in neutral.  The clutch seems to be
operating fine, however, when you put the car in gear and let out the
clutch the transfer case grinds like crazy and the car doesn't move.  I
had to replace the diff lock actuator because it was broken during
removal of the trans, but otherwise, I didn't change anything on the
trans/diff itself.  I disconnected the rod from the diff lock actuator
and can move it back and forth but it doesn't make any difference.
1.    Is there some type of adjustment necessary on the diff lock
actuator to make it hold the transfer case in gear?  Neither my 4k
Bentley or the 5k Bentley mentions anything about adjusting the
actuator.
2.    Any ideas what might have occurred to make the transfer case/diff
lock system malfunction?
3.    If the tranny is hosed, can it be replaced with the 016 from my 87
5kcstq?

Thanks  much,
    Incidentally,  this was the most involved clutch job I have ever had
the misfortune of performing.  I couldn't believe how much junk I had to
remove to get that tranny out.

Tim Sexton

94 S4
87 5kcstq
86 4kcsq