Just recently purchased 2007 Grand Cherokee to pull behind our motorhome. Made sure to get one that had the capability to shift the transfer case into neutral for flat towing. However, like a dummy, did not actually try it to make sure that it worked before purchase. Long story short, had all the hitch equipment and wiring etc., installed and thought it might be a good idea to hook it all up to make sure everything worked, as we have a 5000 mile trip coming up soon. Everything went as planned until it came time to shift the transfer case into neutral. Just as you have all discovered, it wouldn't work. So I started researching and luckily found this forum.
I would like to thank all of you for your entries. With the information I gained from the forum I was able to use the fuse trick to get it working, at least temporarily, and thanks to Tom Garret's entries, was able to contact my Chrysler service center and found that my vehicle had the N23 recall performed in June of 2014 before I bought it. They also advised that they had received an updated "fix" for the N23 recall in the past month. Bottom line is, they installed the new software fix this morning and so far, so good. Time will tell. If it continues to work during my upcoming trip, I will consider myself very fortunate that I was able to get this information, and get it taken care of so quickly, and best of all at no expense.
I will check back in after the trip with an after action report.
Thanks again for all the good information that put me on the right track.