sounds like a front diff to me...maybe she stripped the gears...open the fill hole on the front diff and try sticking a magnet down in there, and of course be very careful not to drop the magnet in...should go without saying, but you'd be surprised. see if you can pull out any metal shards or feel anything moving around.
The front driveshaft CV head is another common culprit when it comes to 4wd problems on the liberty...check the boot for tears, but if the driveshafts are locking together, I wouldn't expect it to be a t-case or driveshaft problem. If you physically turn the front driveshaft do the front wheels turn at all?