If i remember correctly chevy had a problem back then with the actuator (i think thats what its called) engaging the four wheel drive. Might want to call down to your nearest chevy dealer and ask what they charge for the piece to engage the 4x4.. At least then youll know what its called.

That's probably it. I had a 98 Z71 and I believe it was a $100 part back then. It was a pretty common problem in the mid to late 90's... several friends had to replace theirs also.