Mercury Mountaineer Severe Rubbing when Turning

2002 Mountaineer AWD. When turning, it almost feels like you are breaking. This has been a minor issue since I purchased it new, but problem has gotten alot worse more recently. It also recently started getting abnormal tire wear on inside edge of front tires. I had a front end alignment about 3 months ago and put back tires on front (60-70% tread left) and new ones on back. This weekend, one of front tires went flat. After getting tire off, I saw that cords were showing on inside edge. Today, I replaced the two front tires and took vehicle to Ford dealer for front end alignment/diagnosis. They say it is transfer case - $2,100. Does this seem like the correct diagnosis and reasonable cost? Dealer also said that it is unsafe to drive. I want to unload it but was hoping to get a few more weeks out of it (with current transfer case) while I was shopping for something else. Dealer said that if it goes, I will have to replace core too? Thanks in advance for any responses.