To begin with, your car ought to have the following gear positions, 4H, 4L, 2H and N? That’s odd. There should be 2H also, which is the recommended setting for ordinary driving. This is what those letters mean:
4H stands for 4-High, which basically means 4WD is engaged, but the transmission is in High range. This gives normal driving speeds. This setting is for use where one or more tyres are losing traction but speed is not an issue, such as on flat ground with a thin and slippery, muddy layer on top. It will keep the car moving even while suffering wheels pin, and will prevent skidding (up to a point).
In a car with selectable 4WD, it is not recommended for regular use, especially on tarmac, as it is heavy on the fuel and the car is difficult to turn (there is a tendency to go in a straight line). Extended use of 4H also wears down the transmission. Use only when necessary.
4L (4-Low): This means 4WD is on and the transmission is in low range. The least used 4WD setting for most drivers, 4L is intended for extreme conditions, where speed is undesirable and might actually lead to disaster. Such conditions include descending steep slopes, crawling over rocks or over terrain so twisted and gnarled that one or more wheels catch air every now and then.
The extremely slow speeds might cause the engine to stall in normal transmission settings, which is where the low range comes in. It allows high engine speeds with low road speeds.
The low range also multiplies torque and allows the car to crawl up inclines of high aspect ratios, which normal cars cannot tackle. In most cases, the diffs are locked by default when 4L is engaged.
2H (2-High): 4WD is disengaged and the car is on 2WD. This is the setting for normal, day-to-day use on regular road surfaces. It eases up the rolling resistance offered by the transmission weight, thus boosting performance and fuel economy. The car also steers easily since the workload on the steering wheels is reduced.
N: This has to be neutral. It works more or less the same as neutral in the primary gearbox. It disconnects both front and rear driveshafts, allowing the engine to be used for other purposes by means of a power take-off (PTO) shaft.
This is mostly old technology; most new 4x4s don’t come with PTOs, which in turn means some might not have the N position, especially for those using an electronic switch to engage/disengage 4WD rather than the traditional gear lever on the floor of the car.
This now begs the question: How was your car operating on N (neutral)? This is my surmise: your car uses the gear lever on the floor rather than the rotary switch found on new Escudos.
In trying to select N, you might have “partially” engaged 4L, which means that the gears are not meshed properly. This would also explain the whining noise and the flashing dashboard light. The cogs may be slipping in and out of position intermittently.
If your car has 2H, engage that immediately in the following manner: Bring the car to a complete stop. Engage the parking brake. Engage neutral in the primary gearbox (free). If it is an automatic, place the lever in N, and NOT P (Park).
Make sure the front tyres are pointed straight ahead (the steering is dead centre and not turned to any side).
Depress the clutch all the way in, just to be sure, for a manual car. Place the transfer box in 2H firmly and decisively. That is, make sure the tiny lever has clunked solidly into position. From there, drive as you normally do: engage gear, release the parking brake and go.