Just had the same issue on my 2001 Mitsubishi Challenger PA. Started out with a flashing 4WD indicator light then no light at all. Replaced the diff lock solenoid but then 4WD selector got stuck in 4L so couldn't drive over 50klms per hour.
However I quickly solved that issue by disassembling my 4WD selector assembly and disengaged the 4WD putting it back into 2H then reassembled the selector and all is working find now except the indicator light which might be an electrical problem.
CAUTION. Do not remove the three nuts (30793S) at the base of the selector (30611) or the bolts (30798T) will fall down inside your transmission. Only remove the 4 bolts (30798X) holding the assembly plate (30641) to the transmission.
Just waiting for a new diagnostics scanner to arrive so I can troubleshoot the rest of the transmission and transfer case to make sure there are no more issues. So hopefully this helps a few other people out who have the same types of problems.