OK, saw the movie, the clunking sounds horrible and the reversing wheel spin does'nt look good. I suspect it is the transfer case, not the tranny.
Now if you have inspected the shifter linkage that joins the transmission and it's in good order its time to move onto other things. Be sure your "lock/un-locked - hi/low" transfer case shifter is in the lower right corner position, which is, high & unlocked. Also try to be on level ground and block the wheels of the axle that we're not working on to keep the vehicle from rolling. Leave the park brake off.
My first caution to you would be not to run this automatic trany (it's a German made, Zf 4HP22) "free-wheeling on jack stands" These tranys are notorious (going back to the mid 1980's) breaking IF you speed them with the wheels off the ground. Your transfer case should be a LT230Q, made by LR, since yours is a 1997.
OK, back to analysis, remove the front and rear drive shafts from the transfer case end first and wire them up so you can turn the wheels on each axle. Just put one axle at a time up in the air (you only need the wheels to be a couple of inches off the ground. How does each react to slowly turning one wheel by hand? Each axle should turn freely with no clunking and as you turn one tire when the other will turn in the opposite direction and the drive shaft should turn too. You might hear some scraping noises which will be the brake pads. DO NOT pull the drive shaft ends off and get them out of time and balance. Mark them with pointers to keep them timing correct.
Next the transfer case. Leaving the drive shafts disconnected and wired up and out of the way, (all 4 tires on the ground now & blocked to keep from rolling and leave the park brake off), put the high-low transfer case shifter in neutral and the PRND2nd1st in neutral. You will have to turn the ignition key to on (NOT START) to get it to move, then turn the key back to off. Now we're going to spin the transfer case outputs and listen for the clunking/grinding. Try the transfer case shifter in all positions being sure to spin both forward and rear outputs. When in the "locked" positionS (high & low), both outputs should turn.
The diff lock shifter makes the transfer case operate just like an axle differential when in the unlocked position, so in turning the output of one the other output will turn in the opposite direction. While turning these out puts they should turn freely with no binding, clunking or periods or free-spin (indicating broken gear teeth) I'd turn these for a good amount of time as it may take quite a few revolutions to "feel" all the gear teeth.
Lastly the trany, Put the shifter back in PARK leave the transfer case shifter in neutral, and start the engine. KEEP YOUR FOOT OFF THE ACCELERATOR.......DO NOT GIVE IT ANY GAS.... you'll blow up the trany if you do. This is a listen only phase at engine idle speed. Try each gear position and listen ONLY for clunking, etc. Turn the engine off in gear, then put it back in Park, don't try to put it in park while the engine is on as the trany output is still turning (with no way to stop it) and you may break off the PARK cog in the most rear section of the trany. Now engage the transfer case in high open (lower right corner position). This may take 2 people to get the transfer case back "in gear/engaged" to the transmission, someone underneath to turn the transfer case outputs in order that you can get the transfer case shift handle in forward high position. Start the engine and put it in 1st gear and listen for clunking etc. AGAIN turn the engine off in gear before going to PARK. Since the problem is in the HIGH transfer case gear, you should not have to do this process in low range or the lock positions
Somewhere in this process you should have found the source of your "clunking".
Lastly, do you know that you can use only one axle as a drive axle by removing one drive shaft completely and putting the transfer case in the locked position?