It's possible (depending on the model year) that the thick rubber boot is binding and causing the shifter to pop out of or not fully engage certain gears. By dropping the transfer case you essentially shorten the shifter so the boot gets bunched up can become a hindrance.
I dealt with a similar situation when I installed a body lift. I found the stock shift boot wasn't going to work. My solution was to switch to a fabric bag-style boot. It worked well for me until I did a tummy tuck. Then I was able to go back to the factory rubber boot.