Not really important or helpfull post to the topic, but its a pet peeve of mine. THE LOYALE IS NOT AWD, its 4WD. 4WD. 4WD!!!!! There is no center diff, there are transfer gears. When you push the button, its not in AWD, its locked in 4wd (if the tranny is working properly). There is no slip between the front and rear when the 4wd is engaged, so there will be binding if its driven on dry pavement in 4wd, because its not designed for that. If you drive it like that too much it CAN destroy the transmission's 4wd output gears.
If one of the previous owners did not know the difference between 4wd and AWD they probably drove it on the street, every day, in 4WD, and in the process destroyed the 4wd output gears while wondering why it was binding in turns . The 4wd system on these Loyales is more akin to the 4wd system on a fullsize Ford 4wd truck than a AWD Legacy, you don't use it on the street unless you are driving in adverse conditions (snow, heavy rain, ice, et.).
On a side note, I had a transmission from a wrecked GL (5 speed D/R 4wd) that had rear ended a PT Cruiser at 60... The 4wd engaged and the gears were intact when I opened the rear cover, but the aluminum collar machined into the case that holds the gears in position had broken from the impact, and the gears could slide in/out of 4wd anytime they wanted to.
Back to the topic, pull the tranny out of the car and pull off the plate on the tailsection to look inside. You will be able to inspect the transfer gears for damage or something blocking the 4wd from fully engaging. Pull the drain plug and imspect the fluid for metallic particals or chunks of the gears as well. If everything looks good, then go over the 4wd engagement system, which is 2 electric vacuum solenoids hooked up to a round vaccum diaphram mounted on the driver side of the tranny, connect to a cable that runs to the 4wd lever on the passenger side of the tranny. If there is a vaccum leak somewhere it may be pulling the diaphram enough to get it to begin to engage, but not enough to fully engage the 4wd, hence grinding and bad noises.
4wd.
-Bill