Thanks for the info and vid link. seems like a plausible explanation. Do these problems continue to the MP t-cases of late 2000s? I think your 2002 would have been an NP261? Just trying to figure out if this is a systemic problem with the MP3023. I purchased a used one from LKQ today - 120K miles for $265. 6 mo/6000 mile warranty. I pick it up tomorrow and hopefully will install same day. Fingers crossed I don't have same problem with the new one in 6 months + a day.That's a pocket bearing and they're known for cracking on these, which I would wager is what's happened to yours. The root cause is a broken snap ring groove on the rear main shaft that forces the shaft into the planet, breaking the bearing. I only know this because I had a transfer case problem on my 2002 and remembered this detail from my troubleshooting on it. This video shows it well, starting at 5:00.
At least the MP t-cases don't have the pump rub problems that the older ones had.