Get a service manual to understand the entire circuit that controls the 4 X 4. There are several switches along the way. Possibly one of those switches is stuck in an open position, allowing the indicator light to still come on, but not sending power to the hubs. It is very important to service the hubs per the SM, they get gunked up from the wear of the parts.
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Today's Featured Article - Oil Bath Air Filters - by Chris Pratt. Some of us grew up thinking that an air filter was a paper thing that allowed air to pass while trapping dirt particles of a particles of a certain size. What a surprise to open up your first old tractor's air filter case and find a can that appears to be filled with the scrap metal swept from around a machine shop metal lathe. To top that off, you have a cup with oil in it ("why would you want to lubricate your carburetor?"). On closer examination (and some reading in a AC D-14 service manual), I found out that this is a pretty ingenious method of cleaning the air in the tractor's intake tract.
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