80 series is a great vehicle to learn on :)
Here is a great resource explaining how differentials work in practice, and differentiates (ha ha, see what I did there :rofl: ) between centre diffs (CDL) and front/rear diffs.
https://www.lcool.org/technical/diffs/diffs.html
And, this may assist...
Does it have freewheeling hubs on the front? It may have had a part-time kit installed and is giving a false engaged signal.
To test for CDL engagement properly you really need to disconnect the front propshaft (there are other more risky methods.....) and see if the transfer case still...