Strange trouble with S10 transmission

I've noticed the last winter that when I shift my 92 S10 Blazer into 4 wheel high, it works great. When I shift it out, the wheels disengage but the
light on the console still shows it is in 4 wheel. The front wheels do not spin so that part is not engaged but at higher speeds you can feel a shudder.
If I put it in neutral and back to 2 wheel the light will eventually go out and all feels right again. Back to smooth at higher speeds.
I forgot about it yesterday and drove it on the interstate at 75mph and felt the shudder, looked down and saw the light. Looked back and saw smoke. Pulled over and popped the hood and you can see fluid came out the breather tube on the firewall from the tranny spilling onto the exhaust.
Got the light to go out and back to two wheel drive and went on my way. Now the truck shifts smoother and sharper then it ever has! :) very strange.
It has 327,000 miles on it and the fluid and filter has been changed twice.
I find it strange that is shifts better and smoother then before, I would think it was horrible on it running it like I did. 4 wheel still works. Fluid is not burnt bad. I think I will change it anyway. I always add Lucas treatment to it.
What the heck is this thing doing??
Lannie
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While it is not required to do this I find it works for my truck. When you disengage your 4wheel drive, put your truck in reverse and back up 10 or so feet. Light will go out, and it will fully disengage (or it should). My S-10 also has shift on the fly, and it always does eventually disengage, but I don't want to drive at all with it halfway in 4 wheel drive.
Big Chris
LS wrote:

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Yes, I've learned to back up then forward now and it goes out,.
I was worried about the old saying. "They run good just before they blow!". Who knows what I did to it but it's running great. :)
LS

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$16.00 vacumm switch that is located ON-TOP of The Transfer case or U have a Broken Vacum hose LEADING to it..
LS wrote:

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Awww, if either of there were the actual problem, it won't go into 4WD at all
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