There is an oil pump in the back half of the transfer case that sits in a little pocket and is run by the output shaft (news to me, I thought they all worked off of splashed oil) and the pump wears a hole through the soft magnesium case.
Here's my hole, it's about the size of a dull pencil tip.
Here's what happened when I tried to overfill the case so it wouldn't run empty as fast.
I'll be replacing my case since it ran dry for 2 or 3 days before I figured out what was wrong. It drives like new with fluid in it again but I'm sure it's days are numbered now.
Maybe somebody can benefit from this information, and if you're a better safe than sorry kind of guy you can fix your case before it's a problem. There are at least 3 products I've found that are made to combat this problem. This is the cheapest/fastest one, but all of them require you to split the case and add some parts before you wear a hole in the case.
http://www.makcotransmissionparts.com/482460.html