I'm assuming you have Auto-Trac with Auto 4wd, 4Hi, and 4Lo. Only Auto 4wd can be used on dry pavement. Using 4Hi and 4Lo on pavement will cause driveline binding and damage will result.
Earlier this year I was unable to engage 4wd in any setting due to a bad vacuum switch (mounted in the center of the firewall). The switch controls an actuator under the battery that engages the front axle. The default mode is the axles disengaged (2wd). Also check the condition of the vacuum lines, the lines on my 2000 Blazer are in bad shape and need to be replaced.
According a GM mechanic the Transfer Case Control Module (TCCM) will lock up if not used on a regular basis. To reset the TCCM, disconnect the wiring harness at the TCCM (inside the pass. side kick panel) or disconnect the battery (easier). This helped when I was having trouble shifting into 4wd. Also to shift out of 4Lo, it helps to be moving 2-3 mph while in neutral. Check the Owners Manual for this.