Maybe I shouldn't have said that it lubricates the diff because I don't know what it lubricates, I assume the bearings for shaft that runs through the t-case, but nonetheless transmission fluid is transferred over into the transfer case housing via the O-ring between the two that the OP was referring to and just wanted to make sure that it was clear this didn't have anything to do with the ACD system. Sorry for the confusion.

 

Since we have confirmed its not ATF for the ACD, it must be the lube oil that goes between the tcase and trans.

Does anyone know if that oil is trans oil that goes into part of the tcase for the bearings, or if that is Tcase oil that goes in part of the trans?

The reason its important is I am going to remove the tcase to replace all the o-rings, and I don't want to empty the trans fluid if at all possible.

In order to identify the severity of the leak between the two, I drained the Tcase, and a bit over .6 of a liter came out which is pretty much exactly what should be in there (.63 quarts). I usually overfill substantially so that overfill leaked out a bit in this seem. The vent on top of the tcase is clear and clean (no oil coming out that way). Its just the gap.

 

Thought I already updated this, but maybe I have a cross thread somewhere. I got some good information from Jon at ShepTrans. The oil that goes between both small and large orings is trans oil. My idea of not completely draining the trans is OK, but only if you realize you are going to leak out some trans oil between the TC and trans when you push the shafts together again. There is residual oil in there, and when you press everything together there isn't enough room in there, and a tiny bit will press out before the large oring has completely sealed.

I proved this by doing it again with the trans completely drained. Then, nothing came out. So small oring trans oil to the outer tcase bearing, Big oring inner bearings/shafts.

 

should be power steering fluid

 

?

hydraulic pressure is provided by ATF, like raptors mentions. There is no power steering fluid in the tcase.

And yes, shaft bearings are lubicated by trans oil, that is why there are oring and passages. To let that oil get from the trans to the tcase side where it needs to. Then internally the tcase has a slightly different oil for the diff itself.