The transmission is a 5 speed as you have indicated, L,2,3,4,D.
You will not hurt the transmission by using the lower gears.
The various positions are the gears of the transmission,
you can use it like a stick if you wish, by starting out in
low and shifting just like a manual trasmission.
The is really a very good feature for towing and driving off road.
If you count the low range of the transfer case you will have 10 speeds.
Cliff s