Hi dom14, I don't think reversing in low range with the hubs unlocked will damage anything. I do it all the time! I doubt there will be any uncontrolled spinning of front diff as the transfer case splits power 50:50 on both ends so if rears aren't spinning it will be constant power to the front. You also won't be revving the guts out of it either.
Do you know what type of flywheel your Patrol has? The symptoms you described sound like a dual mass flywheel that's leaking oil from the buffers onto the clutch. Happened to a friend a few years ago (GU 3.0 litre). No drive and burnt smell yet the engine was fine. If no DMF then maybe the rear oil seal as suggested previously.




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