Adding to what projectsho said, you need to see if the driveshaft is turning. The AWD clutching is done at the back, but the whole front drive system is mechanical - the driveshaft to the rear must turn by design.
My 05 AWD went out, so I jacked up the front of the vehicle and kept the rear wheels on the ground. I put it in drive and carefully let off the brake, then even added gas. If you try this, let the brake off slowly and see if the car tries to move forward. In my case, the front wheels turned but the driveshaft stayed motionless. This means a mechanical problem either in the transfer case or transmission, both big jobs. No more AWD for my 05.
My symptoms were exactly the same as yours - it rode and drove normally until I hit snow or rain on a hill. The front wheels would spin and then the AWD light would flash. No ABS light on. If your ABS light is on, then investigate a bad tone ring or wheel speed sensor.
If the driveshaft turns, but the rear wheels don't get power, there's a problem with the rear diff not clutching, and this could be electrical/sensor/ABS in nature or a mechanical problem with the rear diff itself.
John