Bingo! Got the tell-tale clicking sound, signaling the problem is the stripped gear in the transfer case. The shop who did the autologic diagnostic quoted $3k plus to replace the transfer case as a solution. Instead, I could do the 'no cost' rotate the gear, but have instead ordered the $35 amazon version replacement, carbon fiber reinforced gear. I figured since I have to pull the actuator motor, I might as well replace rather than turn the gear. As always, knowledge [from here!] saves money!

__________________
2006 X5 3.0 6-spd w/Evo UUC ssk
sport/premium pkgs
born Valentine's Day, 2006.