i bought a early 04 sportsman 700 carb with 2,000 miles. Since i purchased the quad, i have replaced all the lubes oils. Before i replaced the fluids, i noticed that my front axle was not operating at all when in AWD. I did a little research and drained existing fluid (dark in color) and flushed gear box with carb cleaner and fresh Polaris fluid. I then refilled with exactly 5oz of genuine PDD fluid.

Now i am noticing that quad engages in to 4wd no matter what the selector switch position is in, both forwards and backwards (with override button pressed). While going forward with selector to the OFF position there is heavy 4wd feed back thru the steering. Surprisingly enough when the selector switch is in the ON position, the feedback is gone, giving me the illusion that the front axle finally unlocked.

speedo seems to be fully functional, and 4wd icon is only displayed while selector switch is in the ON position.

revision:

AWD seems to only want to lockup / work in reverse.

The heavy feedback through the steering usually means the 4WD engaged while in reverse, and didn't 'unlock' before going forward. When this happens, back up a ways on a smooth, level surface, and see if this helps. If your 4wd mechanism is damaged, this may not work, but is what you do with a normally functioning system.
If it locks when you don't want it to, with clean fluid, usually the next thing to check would be damage from dirty/contaminated fluid, or a cracked roller cage in the 4wd mechaism.

okay got my service manual. Tested the resistance of the armature coil and it was 25.8 ohms (book says 25.2 is upper limit). I guess for a machine that is 6yrs old and 2,000 miles old than it is not to bad, front axle still works in reverse. Then I tested the voltage going to the front axle, book says 12vdc. Key on and AWD on, i get a voltage fluctuation between 4.5-11.95vdc. This fluctuation is somewhat gradual and takes approximately 1.5 seconds to go from 11.95 to 4.5 and back to 11.95vdc (kind of like a + DC sine wave). When the throttle is touched the voltage goes immediately to 0vdc, as i am sure it is supposed to. If it didn't, the front axle would stay locked up full time. Tested battery voltage (quad off) 12.9vdc.

I guess I need to run leads from battery directly to front axle to see if i can achieve 4wd while going forward (ex. manual 4wd).

Has anybody ever measured the voltage going from AWD system to the Front Axle?

The voltage should be steady at battery voltage. The throttle really shouldn't have anything to do with it.
Test voltage with the keyswitch on, kill switch on, AWD switch on, and the gearshift in a forward gear.
Polaris has a safety built in where it won't engage 4wd unless you are in a forward gear, or are holding the override button down. If the gear position sensor isn't working properly, you can get intermittent AWD, or AWD in reverse, but not a forward gear. I'd start there, and go through all the connections to be sure they aren't corroded, and check the wiring harness to be sure nothing is worn or kinked.