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Engine/Transmission (1994 - 1998) 241HD Transfer case input splines destroyted

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Engine/Transmission (1998.5 - 2002) turbo replacement

Engine/Transmission (1998.5 - 2002) np241 to NV271

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Truck is a 97 3500 4x4, 198k. Truck has been in CA its entire life.

While putting in a reman transmission today I noticed the internal splines on the transfer case input sleeve are about gone. Only about 30% of each spline is left(only a short and very sharp ridge remains instead of a full interal spline). The cavity was full of rusty looking grease, and that is what prompted me to clean it out real good. The output shaft splines on the transmission looked good.

What would cause this???

And can this this inner spline / sleeve be easily replaced?
 
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