06 F-250 6.0 Powerstroke... 4x4 not working, transfer case engauges and locks front drive shaft but I can still turn the front axles by hand at the hub... any ideas?

if you have shift on the fly the shifting fork in the dif might be broke or not engaging

the hubs are vacuum actuated. its usually a bad actuator they are mounted on the firewall on passenger side. sometimes there are broken vacuums lines causing a leak.

The hubs are indeed vacuum actuated and sometimes the vacuum lines themselves are the culprit. Most of the time, however, the issue is that the hubs haven't been serviced -ever- and the o-rings inside are damaged which prevent the air seal necessary to lock them in. To get around this issue temporarily, you can manually turn the hubs clockwise -on both sides-. Just remember 'clock to lock'. Don't wait on the hub service, though. Replacements are pricey and the kit is cheap.