It sounds like you've narrowed it down, I'd check the front Xfer case fluid (level & condition) and look out for signs of anything that may be rubbing up there..

But since it's winter outside I want to throw one more thing out there for you to consider...whenever we get snow out here the road crews do a really good job of putting salt & brine down. The slush and brine mix tend to cover everything on the underside of my Xterra including the hot exhaust system. After a little while of driving in that stuff(when everything heats up) it does give off a slight burning odor - and I usually happen to be in 4WD at the time b/c of the conditions...

It's pretty obvious to me that the odor is that salt brine getting splashed up all over the hot exhaust and yes, we get it on 2WD vehicles as well but not the same extent, simply because the 4WD vehicles always seem to find more and deeper snow to go play (I mean drive) in...I wonder why that is...

-Saturday