I drive an '06 Z71.  I was gonna pull a friend out in a similar situation.  I stop, shift to neutral, punch the 4 low button, lights flash and click into gear, green light, shift to drive, and it makes a god awful gear grinding noise, and then no power. 

  I disengage the 4WD, then drive away as if nothing happened.  I still dont know what happened to this day, but its been 3 years and it hasnt happened again.  Right after that I tried again with no problems, and got my buddy out of the crater the moron drove into.