Unfortunately it doesn't sound that unreasonable as they would have to drop the pan, remove the case, then break it open to see what they could find. It sucks, but at 100 bucks an hour plus parts that's what it comes out to.
However before you took it somewhere there is a couple things you can check on your own. Your 4wd selector is attached to the TCase by a series of linkages that are affixed to the body. There are a couple of plastic grommets at different points that can crack and fall out leaving the linkages bound up. Pop under there with a flash light on the drivers side and see if you can verify that all of the linkages seem to be attached correctly at both the shifter, TCase and Body.
If that doesn't seem to be the culprit then I compeltely agree with Jerry that 231 cases can be had and installed on ones own for way less than 1500.