So the transfer case debacle is done and my Bronco is up and running again.
The main lessons learned was the '89 BW1356 isn't 100% compatible with '88 due to flange change and rear output shaft diameter change.
Parts costs were:
1. Salvaged '89 BW1356: $266
2. Driveshaft modification: $300
3. Replacement transfer case seal (one looked bad): $25
4. ATF fluid (2 quarts for transfer case): $13
Total: $604.
For the cost it might have been cheaper to rebuild the old case or not; I'll do a post on that eventually. But I do have a backup transfer case so that is a plus.
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