A weeping Transfer case means that there is some seapage of the Gear Oil inside the AWD case through the seals. You can live with it, replace it, or have the unit re-sealed by a KNOWLEDGEABLE repair shop. The valve body replacement is common if the transmission never had a Transmission Control Module software upgrade. The upgrade was to smoothe out harsh down-shifting.
I would just do the valve body and keep a sharp eye on the transfer case by crawling under the car every few months and monitoring oil in the garage. The Transfer-Case seapage happens on EVERY All Wheel Drive Vehicle over time. I worked for Volvo and we saw this a lot on the XC90, S60-R, and Cross Country model around 80-100k miles.
Best Of Luck
-Mike
P.S. I have a 2002 E320 4-Matic, and I ALWAYS check-up on the transfer-case. It is simple smart maintenance!
