My 0. 02:
At one time I knew the information solid, my problem is whether I can remember it correctly...
I was tempted to chime in when I first saw this post, but I held off because my truck is an 05 and the OP question was 04, and I wasn't sure if my info was relevant, and I didn't want to muddy the water. So now here comes the mud...
My truck has the BD overdrive lockout module installed. (did it myself a few years ago). To my knowledge, that module is specific for the 05 trucks, will come back to this later.
My truck has a Gearvendors overdrive unit mounted at the rear output of the transfer case. Effectively, that makes it like having a 2-speed rear axle (and yes, I cannot engage the GV OD while in 4WD because of how it's installed).
My 05 truck (I'm going to say all 05 48REs) absolutely yes do end up in 4th gear (OD) whether they are in TH mode or not. TH mode changes the up/down shift decisions, but the trans still ends up in top gear. For example, on a long flat stretch, start from 0 with TH-OFF and accelerate to 70MPH, set the cruise, end up with engine tach reading xxx RPMs. Stop, turn TH-ON, repeat the process, cruise at 70MPH you will end up with same tach reading- trans is in 4th gear, TC is locked.
05 TH mode does change one thing about lockup- in 3rd gear.
This is where my memory is a bit fuzzy. #7 AMcCormick will be able to confirm this once he gets his BD OD lockout module installed:
If I remember correctly:
When TH is OFF, then the TC does NOT lock in 3rd gear.
When TH is ON, then the TC does yes lock in 3rd gear.
Explanation I have read is that was done to reduce slippage and preserve trans fluid temps when the drivetrain is heavily loaded.
The BD OD lockout box uses the same TH button on the end of the shifter- it looks for the user to press the button TWICE in quick succession. Thus (with BD box installed), when you start the engine fresh, TH is OFF. Press the TH button once, and TH mode comes on. Press the TH button again twice quickly, and the BD lockout feature is engaged. Doing that, you also just went out of- and back into TH mode again. So you're in TH mode with BD 4th lockout active. etc. (The BD box comes with an LED that you install wherever you want it, which lights when 4th gear is locked out. ) In my experience, I don't fool much with changing the modes while the vehicle is moving- I try to anticipate what state I'm going to want, and set that before I move off.
So the presence of vehicle TH option, plus the BD OD lockout module, gives you a matrix of 2x2, which results in 4 possible states. Assuming a fresh start with TH-OFF and the BD 4th lockout OFF (inactive), here's an effort to list the 4 states:
X means a single push of the button. XX means two quick pushes.
[1] (no pushes) TH-OFF and 4th lockout-OFF. TC is unlocked while in 3rd gear. Trans will progress to 4th gear.
[2] X (TH-ON, 4th lockout-OFF) Trans will progress to 4th gear. While on the way up, TC will be locked when in 3rd.
[3] X + XX (TH-ON, 4th lockout-ON, BD light is lit) Trans will stay in 3rd, not shift into 4th. TC is locked while in 3rd.
[4] XX (TH-OFF, 4th lockout-ON, BD light is lit) Trans will stay in 3rd, not shift into 4th. TC is unlocked while in 3rd.
Difference between state 3 and state 4 is- in state 4, RPMS for a given vehicle speed will be a bit higher due to TC slippage. Also, when in state 4 going (for ex. ) about 55MPH, and take your foot off the accelerator, you'll see the RPMS drop off due to TC slippage. Do similar in state 3, you'll see RPMS remain constant as with a standard trans, because TC is locked up.
Hope this is of help to some. I might have the bit about the TC lockup in TH-ON vs TH-OFF exactly backwards, but I don't think so. Someone please do yell at me and I'll edit this post if I've got it @$$- backwards.
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To my knowledge, the "4th gear still comes, even when TH-ON" was specific to the 05 models, and was changed again for 06-onward, back to "TH-ON means top gear is locked out" after many customer complaints, hence why BD aftermarket made the module to give the 05 owners same capability everybody else had (to lock out top gear). Installing the BD lockout on 05 gives you the choice of TH and TC lockup or not, along with choice of top gear or not, which results in a nice selection, if not a bit complicated.
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Now for some banter- (my truck is 48RE with stock wheels & tires and 3. 73 axles)
imho, the "difficulty" with this setup overall is that there's a fairly big difference between 3rd and 4th gear in the 48RE trans. I happen to remember that 3rd is 1. 00 ratio (straight through). I don't recall exactly what 4th (OD) is, but it's a big step different from 3rd. 0. 72 or something like that- on the order of 28% different from 3rd. The bottom line is- if you lock the trans in 3rd, it's not practical to travel at modern highway speeds because the engine RPMs are near redline. 4th gear was chosen largely for economy in unloaded or lightly loaded condition. Towing heavy loads in 4th, I discovered the engine will do it, but often runs at high boost and relatively high EGTs. (and resulting relatively less than ideal MPGs... ) Note if you happen to have 4. 10 gears, that doesn't fix the issue- that big difference between trans 3rd and 4th still remains. The 4. 10s just shift the overall engine RPMs (in whatever gear) upwards a bit, so the highway towing might be a bit easier. Note that the difference between 3. 73 and 4. 10 is 10%. (3. 73 + 0. 37... )
In the stock configuration (before adding GV and BD lockout), I discovered one more associated "don't like that"... When towing on highway, using cruise control, running in 4th gear (usually around 1700-1800 RPM), and come up on a grade or hill- cruise control will add boost more and more... (cruising along in 4th... ) At some point, what I found to be typically around 25PSI boost to 27PSI boost and the vehicle has slowed to a certain point, the trans will downshift. The result is a (rather harsh) blip to near redline, and boost spikes well above 30PSI. I have read elsewhere this situation can be a cause of the burst end tanks on the plastic intercoolers. My truck was one that came stock with the plastic intercoolers

. I did not experience failure of the intercooler, but I really didn't like the RPM jump on downshift, so I learned to watch the speed and boost gauge, and I would manually take it out of cruise as boost approached 25+, to avoid the "self downshift under power".
The Gearvendors box is nothing more than an additional overdrive. Key there is- the GV unit doesn't have nearly as much difference ON/OFF as there is between the stock 3rd and 4th gears. The GV has about half the difference. So, whereas I used to run around 1700 RPM in 4th stock, now with the trans in 3rd + GV OD-ON, the equivalent RPM is about 2000-2100, which is much better for this particular engine. It runs at lower boost and lower EGTs, and towing MPG (towing a 20 ft Haulmark, about 7K) went from about 10-11MPG stock, now to about 14-15MPG with the GV and BD. (and please note, that towing comparison was BEFORE I installed the Banks stuff with new intercooler. it might be even better now with the bigger IC- I just haven't towed anything yet to find out !)
Lastly, one additional benefit of the GV box is that (when empty), I can run in stock 4th + GV, which results in about 1500 RPM at highway speed. Again, I have not yet had the occasion to take a run of atleast couple hundred miles to hand calculate the MPG, but it seems to be improved over the ~ 19-20 MPG stock 4th. With the GV OD 1500 RPM highway, the overhead console reports MPG that is... wayyyy above 20 MPG. But I'm not even going to post what numbers the overhead indicates. I'll post real hand calculated #s when I get them. Might be next summer!
OK, so that's my blather. Hope this helps to make everything clear as mud.
I'll crawl back under my rock now...
Best to all.