The transfer box + gbox sits right under the front passenger seat, could be either or. I just checked their website and as presumed their transfer case comes with no oil. You mentioned last week it was installed but then said to my question a couple of weeks ago. As mentioned, give the exact sequence of events from installation till now including oil used. Again, I would wipe out front end transfer case or diff as this could only fail if in difflock. For that matter might as well include and gearbox changes and oil used......
check the play with difflock engaged front and rear and let us know if there is play in the front end and rear. I bet not but this is a start. LT230 are pretty tough (possibly overengineered) but again usually it is the rear output shaft and flange that fails as they are always engaged, and the front end is for low speed + poor traction so basically very tough to wear and tear unless you're in some quicksand and need to gun it but a defender will never get you in this situation.
My assumption is something is slacking and with throttle aligns itself back up, and when you release it slacks again. Hmmmmm.
Could be an oil issue. Tough one. Define or give an example of this "grinding" noise? I can't see the lt230 failing that new especially from ashcroft unless the driver abused it incredibly. I am talking about a full burnout, ABS on, TC on, 4,000rpm, the whole nine yards.
anyways, try the difflock test before removing anything