I think it is funny that I managed to break one of the stronger parts of my drivetrain LOVE THAT TORQUE.

There are 3 different 242 transfer cases - light ones used on Jeep, Medium ones used on the Dodge Durango and Heavy duty ones for Hummers.
http://www.newventuregear.com/tcases.html

I'd still bet you have an internal adjustment issue - if you broke it - there would be more problems.

I though KJ's just sucked trying to reverse up a hill/small bumps in general. Mine does.

So a junkyard pull from a Dodge durango could be a cheap upgrade? what years?

I've had trouble with my 242 T-case in the last year. At Eagle Rock, the front diff kept losing all power, meaning the front wheels wouldn't turn, but the lever was still in part-time or 4-lo and the dash-lights showed it working. I had to keep disengaging and re-engaging 4x4 only to have it continue to do it. It only happens when accelerating and especially uphill, with a noticeable clunk. I only know it happens when I lose traction and hear the noise. I don't know if I was engaging the 4-lo and the 4-hi's wrong, but I never solved the problem. A few weeks later, I went up to local forest trail. T-case worked just fine, even uphill, until I left the area and disengaged the 4x4. At that moment shifting the lever down, all the sudden my dash lights showed part-time being on! For the next week, the 4x2 position for the t-case became 4x4 part-time mode. The Full-time and 4-lo positions stayed put, but the part-time position became 4x2. I did a couple test to find out that the 4x4 mode that was engaged was actually the one with the dash light on. The lever position was just out-of-whack positionally, not physically damaged or out of place. I took it to the dealership who wanted $400 to "replace the bad switch", but I took it home laughing. It fixed itself the following day, like it never happened