I have a 2005 Chevrolet Silverado and my SERVICE 4WD light comes on about once a week. When the light is on, the truck won't engage into 4-wheel drive. When I turn my truck off and start it again, the 4-wheel drive will work until the next time the light comes on. If I turn off the truck with the 4-wheel drive engaged, when I turn the truck back on, it is still engaged.
I have replaced the switch on the dash. GM has replaced the electronic control module and updated a program. It seems to happen most often when I hit bumps, especially wash boarded gravel roads. It seems like it could be a bad connection or ground.
The VIN tells me you're driving a half-ton with the 5.3-liter V-8. When the Service 4WD indicator lights up it's telling us there's a problem related to the Transfer Case Shift Control Module, the appropriate Diagnostic Trouble Code has been stored in the control module's memory, and it's gonna shutdown 4x4 operation to prevent additional damage.
When the failure is intermittent, it's like it never happened every time you restart the engine (cycle the ignition), until the fault reoccurs. Then the light comes back on, and you're out of business once again. According to your records the transfer case shift control switch and the control module have been replaced, topped off with a re-flash of the module's software. But, not a mention about the diagnostic trouble code which was stored in the control module's memory bank -- nothing more important than that.
If it was DTC C0374, chances are there's a bad connection in the wiring harness between connector C151 (under the hood) and the transfer case. This is part of the circuit between the front and rear propshaft speed sensors (mounted on the transfer case) and the transfer case control module.
Chevy technical service bulletin 05-04-21-003C, dated April 15, 2008, discusses a water intrusion condition affecting the harness and gives part numbers for modified harness assemblies and connectors (part numbers vary by vehicle option codes). This problem has been setting DTC C0374 and causing erratic 4x4 system operation on certain Silverado, and additional GM built full-size and mid-size trucks and SUVs ranging from 2003 to 2007.