I gotta say that's an absolutely new one to me.
I've got a 77 M880 Dodge here - full time FWD, basically just does the low lock thing when you shift the xfer case.
You've got a W150 - or at least that's what it should be. It might have the 318 or 360 in it, and it probably has the 727 tranny. It also probably has the NP203 xfer case in it - a chain driven full time 4wd case also used on GMC and Chevy during that period. Unless it's been somehow kitted, that case will drive both ends of the truck at all times. With a conversion kit you can free wheel the front hubs, but it'll still be turning the front driveshaft. There was another conversion kit for the xfer itself, that would make it a part time 4wd case, but it was expensive and most people didn't really like the chain drive aspect of the NP203, so they just put a heavier case in.
As Dredge said, that front end isn't meant to be used as a full time front wheel drive - something will go eventually.
The other thing about Dodges from this era is they had really lousy U-Joints - you have to keep on top of them. Make sure they're lubed and in good condition. Carry a spare or two. Don't ask me how I know
Anywhoo....with a full time 4x4 system, both ends drive at the same time, but there's a differential action going on - power will go to the end that has the least traction. If same traction or resistance it is equally split. Once you drop it into low lock or high lock, the power transmission is equalized no matter what...so you can take out a driveshaft and still drive on the other axle. Why's this important? Lots of people do this, since it's the cheap way to get 2 wheel drive and better fuel economy, but the problem is that it wears out the xfer case pretty fast and sooner than later it's time for repairs.
I suspect what happened was someone jacked up the front of the truck, put it in gear, started her up, and saw the front end was turning and assumed it was front wheel drive, since the rear wasn't moving.
Czechsix