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Here's the manual on the 4th Gen. Lockable center diff is completely independent of the t-case, which allows "AWD" mode in either 4HI or 4LO on both the V8 and V6.

Exactly right. One clarification on the center diff lock: the lock button in your photo can be pressed (or not) in either 4LO or 4HI. So the 4th Gen T4R can run in 4LO unlocked (that's the default) but can also run with the diff locked in either 4LO or 4HI. On the V6 you can also run 2WD...

This is true for the 5th Gen 4runners, but the 4th Gen V6 4x4 (part time) have 4hi and 4lo, either can be with or without the center diff locked. Essentially the same 4wd options asthe full-time system on the V8s but can also do RWD/2hi.