I have a 1996 Legacy L wagon, automatic transmission with 166 K.  I believe that the duty C soleniod or transfer clutch solenoid is shot.  I put the fuse in the FWD console in the engine bay, and I used get an FWD in the dash with no binding.  Now, when I put the fuse in, the FWD doesnt appear in the dash and the binding continues around slow sharp corners. 

 

Is it worth replacing at this point?  Can I just live with this issue or can or will it cause serious problems?  I am in Vermont so I am fighthing the rust problems.  I have been taking good care of this car otherwise.  166 K isnt alot of miles for the 2.2 L engines so I am tempted to continue keep maintaining this car. 

I'd fix it.  

 

Drop the complete exhaust in one section

Disconnect the engine to fire wall link

Jack the back of the car as high as you can

Drain the Trans fluid

Support the trans at the front end with a block of wood and jack on the front diff, just in front of the pan

Drop the rear Trans support

Remove the Speed sensor on the tail shaft

Drop the Drive shaft

Pull the rear trans housing and replace the C-Duty, if it's bad.  

 

The last one I fixed, the wire was broken off the connector.  Fixed the wire and all is fine.  Cost - a few hours and one gasket for the tail shaft housing.

 

That was in rust free CO.  you may need a little more time.