Question: I’ve just rebuilt the Transfer case after "notorious rub" issue (152,000 mile) output shaft will not turn by hand. Need to know is this normal before reinstall on the truck...?

Answer: The output shaft should turn by hand, when in the transfer case is in 2WD, the input and rear output should turn together. Make sure the rear snapping is seated in the bearing groove. Something is bound up and I would not recommend installing it that way.