1999 to 2007 models had lots of problems with the electronic parts of the 4wd system. The push-button dash switch often failed but there are other more expensive electronic parts of the system that were also known to cause problems. The suppliers GM counted on let them down. You could take a chance and replace the dash switch as its normally cost <$50. The other parts though cost a lot more so changing them without testing the system first would not be wise.
No, there is not a lube sensor.