I think my auto hubs are broken but before I pull the plug on some manual hubs I thought I would get the boards opinion. I did a bunch of searching and this is what I narrowed it down to.
I have a 1988 4runner with auto hubs.

When it is up on jack stands and I shift into 4x4, the light comes on and the front driveshaft turns along with the driver side CV/axle shaft. When the truck is off and in 4x4, I can hold the drivers side axle shaft and turn the driveshaft to make the passenger side cv/axle shaft spin. This leads me to believe that the axle and diff and transfer case are all in working order. Am i right in my thinking that the hubs need to be replace?

So I am guessing that the hubs are bad, but do they usually go bad around the same time? That seems strange. Anyways, I removed the hub cover, the bolt and washer that holds the hub onto the axle as well as the bolts that hold the hub body on. I them removed the entire hub. Has anyone had good experiences with aftermarket hubs besides Warn? Are most people buying used Aisin or warn hubs? Any suggestions on where to buy? I believe I also need the install kit as well. Thanks for any help.

I had a similar situation. After I had replaced the front bearings on my 1st gen '89 I took it out for some fun without any issues. On the way down the hill to head home I heard a dragging sound and then a snapping sound. Couldn't tell what it was and the sound didn't come back. I moved on with life.
The next time I took it out for fun in 4wd it seemed like I was in 2wd the whole time. So, I parked it on loose dirt, put it in 4wd high and burned out. I got out to look and the burn marks were only under the back tires. I put it on jacks and all seemed fine in 4wd. I was confused.
Then a month later I got stuck in the river bed. This was weird, I never get stuck and certainly not in a situation like that. I had the indignity of having my 4wd towed out.
I took off the auto hubs and sure enough, the outer plastic ring had broken on both. So, when there was no tension (jacked up) 4wd engaged, when there was tension (on the ground) I had no 4wd. Now, this was likely my fault as I forgot the rotate the tires multiple times between tightening it, when I replaced the bearings.
All the rest of my auto hubs were perfectly fine, it was just those plastic rings that were trashed. I just happened to find a guy selling a set of used Warn manual hubs for cheap on craigs. So, I just did the full swap in stead of replacing those stupid plastic rings. I am happy to have made the switch.

I recently had the same problem. Put it up on jack stands watched the front drive shaft spin, passenger side CV spin and driver side was spinning but much slower. I already had some manual hubs so i rebuilt them and installed them but haven't had time to test the 4x4. I'll probably do it this weekend and come back here to tell what i found.

I would get the Aisin hubs. I got mine for $20, i'm sure if you look around you can find a similar deal

I'm a little worried i have a front diff problem because how the driver side CV was spinning. But we'll see

Sorry for being little off-topic, but can you more explain "manual" and "auto hubs" ? I am kind of confused atm. I though that manual hubs aka free-wheeling hubs are those where you must get out of car, and rotate in order to lock wheel (hub) to axle. While I imagine those "auto" have something to do with ADD system but I guess I am wrong, since I have ADD and so called "hub" is nothing more then flange that permanently connect hub to axle. Or we have three types of hubs (manual, auto, add)?

You got it right there

Automatic hubs on the early ones are not ADD.