No, it shouldn't leak. I have a '99 XJ and I think our drivetrains are
essentially the same. When I had a similar chain dragging problem, I
removed my front driveshaft and I've had no problems whatsoever with
that. I've put about 4000 miles on it since removal, mostly Interstate
driving.
I think my tcase problem is a little more than just a stretched chain
and I haven't been able to find a shop to rebuild it. They've all
told me to go find another tcase and they'll swap it out for me. I
plan to do that but I'm in no rush Been gettin' along just fine so
far in 2wd.
HeBeJeepN
'99 XJ Sport, Selec-Trac, Trac-Lok