I just had a new transfer case put on my baby and 3 hours and 40 miles later my dash light for "PARTTIME" flickered then remained on. I stopped and ran through all positions and everything seems to be working properly (2wd,4h,N, and 4 L).
Any ideas on what may be causing this? Where this particular sensor may be? Should I sue?

Check at the transfer case switch first. Disconnect it and see if the light goes out.

There could be a wire pinched and grounded or shorted.

I did that, to no avail. the light stil stayed on. Any tips on resetting the computer? would that help?

I believe your wire harness is shorting or grounding.

I just checked the wiring diagram for that. I only have one for the 2000 MY.

Disconnect the battery to reset the computer...but don't think that is it.

not to take away from drman's question but when you put your XJ into 4WD is there to be a light that illuminates on the dash? I have been meaning to post this question but I have done it. I have put mine into 4WD but there has been no light that's gone on...sorry to go off topic as I hope you can help him solve his light issue.

Here is a diagram to look at...00MY...

http://www.dua1.com/AdminFiles/Jeep/00/00_XJ_4WD_lite.pdf