I know one brings vacuum in, one goes to the front actuator, and I have always had a third that just hangs down. It has always worked fine, so I assume the third is a vent?

yup

What does it vent, the lines? I guess when you switch off the 4x4, the vent line allows air to travel to the actuator and release the front? Just guessing. Thanks

exactly. it releases the vacuum

K thanks. Ive gone through all the vac lines and it as all working right. Pulling codes, i get 2 and a 3, so thats telling me the shift motor malcfunction. I guess I'll look for a shift motor.

Plus it vents the t-case itself. If the line is just hanging down, you can get water into your t-case during a deep stream crossing. Follow that vent line and it should have a split above the tranny. That split should go the the back half of the t-case. When taht fluid gets hot it expands, and if you dont have a vent it will find another way to escape, like out your seals.