So to keep you guys up on it.
Apparently this does happen often.

My transfer case failed. I was able to catch it early on but there is a need for a new unit.

My car:
2008 4.8i with (almost) 160K on the clock.

Things to watch out for are loose shafts from the Transfer Case.
Apparently if they fail when you drive they will take out your transmission and possibly drive axles.

Pic just because:



UPDATE: 2016/02/25

Finally fixed.
It took about a month.

The case was shipped to a firm in California.
Got a fully rebuilt Transfer Case and Front Drive Axel.

Cost: about $2700.oo for all (labor, rebuild and shipping)