I think if
@Tank97 has any other Jeepers in the area he may want someone who knows about the 4.0 and it's drivetrain to give a second opinion. Coincidences happen, but having RPM related issues after replacing the distributor is certainly a coincidence that shouldn't be ignored. Not like he is saying the problem happened when he replaced a stereo, after all.
That being said, I would double-check my list of replicating this issue and pay close attention to how the engine sounds at various RPMs from 500 to 2,000 in each state and in each gear when applicable. It could very well be a mis-firing issue that feels like binding: the vehicle acts erratically, until the engine is firing so quickly he can't tell there's a mis-fire on one of his cylinders possibly.
We are, after all, only considering the transfer-case in the first place because some shop told him it needed to be replaced wholesale. The fact that most of us here know a transfer-case can be rebuilt and is a markedly simpler task than just about anything in the drive-train to rebuild and is only replaced in catastrophic failures points to the shop not knowing their you-know-what from a hole in the ground. The fact he can drive without issue above 2,000 RPM also suggests that it's not as dire as that shop makes it out to be (meaning they either don't know what they're doing or they do and are trying to extort him).
In any case, I am certainly skeptical of the transfer-case at all.
@Tank97 knowing that, I'd redo the distributor, maybe even replace the cap again since they're so cheap. Either way, this requires more troubleshooting.