My daughter has a 2008 Unlimited Rubicon and just headed back to college this afternoon. I drove her Jeep and no warning lights this morning. When she started it the "rear lock" light started flashing. I drove it down the street and dropped it into 4 wheel low and it sounded like some serious metal clanging. Put it back in two wheel and no problems. Then when restarted it the light did not come back on. Long story short:
Is it safe to drive in two wheel drive if the light starts flashing again.

Yes

Google says yes, but
from the sound of the rest of your story you have a repair bill coming some day.

Thanks all. Everything I googled looks like it's gonna be a pretty big deal. It's a giant jacked up grocery getter for a bit longer so I told her don't let any dudes take it for off-roading.