Dealer Says not the Transfer Case???

[outofspec]

Hi,
I have a 1999 ML 320 with 112,000 Miles and I think I may have a transfer case issue. I was doing some research and found several great related posts. One in particular by Centumg had the same symptoms, but with a different diagnosis.
My ML is making a ratcheting noise, although not very loud, and it’s only noticeable on take off, from the outside of the vehicle. It seems to be coming from the drive train. There are no drivability issues at all with the vehicle. I just bought the ML, so I’m a little worried the seller may have stuck me with a big repair.
Anyway, I brought the ML to the dealer to diagnose the problem, and either confirm my worst fears, or put my mind at ease. The diagnosis I got back was that the front driveshaft was making the noise and needed to be replaced; not the transfer case. I’ve looked at a lot of posts on the forum, and not much is said about drive shafts, but there is a lot about transfer cases.
What do you guys think, could the dealer be right? Would a driveshaft cause a ratcheting noise? If it is my transfer case what other symptoms can I expect? How long before it really gets bad? The driveshaft is about a $600 dollar part, so better that then a new case, but only if it solves the problem.
I appreciate any thoughts or direction.