2000 Expedition XLT 4.6 AWD has been running fine until today.

Current Symptoms: When I put it in drive or reverse, it starts making heavy thumping sounds and feels like as if it is trying to jump forward (if in D) and backwards (if in reverse) even though the vehicle is not in motion. I can hear sounds from transfer case area. Moving the Trac-Control switch to 4H, stops thumping, however, a solid 4x4 shows up immediately. Not sure whether it is trying to engage AWD and it not succeeding? I tried pulling Fuse 104, which does the same thing - 4x4 light turns on, sound goes away. Any help will be appreciated.

Some history: The vehicle has never jumped revs during acceleration. In the past I would notice thumping/shudder while in motion between 35MPH to 40MPH. No other issues at all. Today my friend drove it with me and as soon as he accelerated, a little hard but not too hard, it made a strong thumping sound as soon as it was accelerated. Then at the stop light it began making strong thumping sounds and 4x4 turned on. The car would not move, had to go to park and back to D a few times and was able to pull to out of traffic (scary !!!!). Since then thumping is consistent.