Grinding noise, center diff shot?

[TurboBeater]

I just finished putting in a 5MT from '02 WRX. Only thing left to hook up is the driveshaft. I tried driving it around the block just to see if it works or not, I figured the center diff should lock and allow the front wheels to be driven.

So it works and sounds fine under light throttle, but give it more and it makes a grinding/ratcheting noise and feels like its slipping? It doesn't make any noise when the front wheels are off the ground. Gear oil level is ok. Is this normal?

[TurboBeater]

Oh yeah, it does this in 1st and 2nd and reverse (didn't try the rest).