Quadra Trac puking fluid from vent tube

[jammer1]

My turn to ask for help. I have a 79 CJ7 with the quadra trac with the part time conversion. This spring the first time I drove her I started leaving puddles from the vent tube from the quadra trac. I have the vent connected to a vacuum hose that is run up the firewall and curved 180 deg down (keep water out). When I left my shop and got home, the next morning I had Transmission fluid puddles under the engine. When I popped the hood I found Transmission fluid covering the engine and fender. The engine is a chevy 350. Thinking I might have a seal leak between the GM Turbo 400 Transmission and the Transfer Case (pressure forcing fluid from Transmission into Transfer Case causing a over fill situation I had the mechanic pull the case to try to find the problem. The connection between the Transmission and Transfer Case was bone dry, seals good. He checked the top where the vent tube is and found what looked like pieces of rtv that was blocking sections of this chamber. He cleaned it out and said to give it a run. I decided to cut a plastic fuel filter open to remove the element and used silicone to put them together. I put the filter in line with the vent tube and drove the jeep. The jeep continues to puke the fluid (you can see the filter and the fluid). Does anyone have any idea what could be forcing the fluid to the top of the Transfer Case and out the vent tube. This has myself and my mechanic baffled. Any help is appreciated.

 

[Peanut Butter]

Empty the filter, check the fluid level in the TC, take it for a drive in 2wd. Double check that your lockout hubs are disengaged before the drive. After the drive check for fluid in the filter. If there check the level in the TC. It should be lower. While your at it check the Transmission fluid level before and after the drive. Make sure it stays the same level. After the drive also check the temp. of the TC fluid. When your setup for 2wd make a very sharp complete turn at slow speed. Do you notice any grabbing of the front wheels or chatter? Lastly make sure your checking your TC fluid at the right spot. Should be a square pipe plug in the middle of the back half of the case. Let us know what you find.