I'm at a loss to explain what that hole might be on the left side, as all the drive-related levers and rods that I remember are situated on either the top or the right side. The lever with which you engage/disengage the front wheel drive is connected to a horizontal shaft that goes through the right side. On the inside end of this shaft is a shift lump that has a finger that fits into a slot on a sliding gear. That sliding gear in turn is eventually connected to the middle gear in the transfer case. The middle gear drives another gear that turns the front drive shaft stub. With the lever disengaged, the sliding gear just spins in place - remotely disconnected from the transfer case. With the lever engaged, the sliding gear engages the transfer case.
That horizontal shaft is the weak spot in this design. On the outside there's a bracket with a spring and ball mechanism to hold the lever in either Engage or Disengage. If the spring and ball get jammed or lost, the lever no longer moves the horizontal rod. But since you said you heard a pop sound, it sounds more like the shift lump broke off on the inside end of that horizontal rod. If the shift lump isn't there to move the sliding gear, the tractor is stuck in either 2wd or 4wd - whichever position the sliding gear was in when the lump snapped. More dangerous than actually not having the Engage/Disengage capability is the fact that your shift lump might be roaming around loose inside the housing - looking for some gears to chew up.
Since you have the front drive shaft off already, simply grab the splined stub that's pointing forward out of the transfer case. If it's locked up, the sliding gear is engaged. If it spins by hand, the sliding gear is disengaged. If you can spin it by hand with the 2wd/4wd lever in EITHER position, there's a good chance the popping sound was the shift lump breaking off.
//greg//