80 series with strange grinding noise

Hi all, My 80 series std has a strange grinding noise coming from the front end when in 4wd. The noise sounds a bit like a dragging brake or the sound of an old windmill - like a shaft turning inside a dry metal slieve. Only happens when hubs locked *and* in 4wd hi or low, and I turn the steering wheel either left or right while moving. Happens about 8 out of 10 attempts to re-create it.

My mechanic came for a drive and even ran outside the car to hear the noise. He thinks its 'external' but unsure what it could be.

Both hubs have been stripped, new cv joints and wheel bearings replaced, the metal bush in the housing tube replaced, oil changed.

My next move is to pull the diff out and have it checked (a lock-right is fitted). The only other thing it could be (I fear) is in the transfer case (tis cheaper to pull the diff first!).

Anyone with any other ideas??
Vehicle drives OK, no other problem in 4wd - only this noise.