It is true that everything in the front diff is rotating whenever the vehicle is in motion. There is no mechanical disconnect between the front and rear drivetrain. The front wheels are only driven once the switch on the dash is selected, and the rear tires slip just a little, which forces the mechanism in the front diff to drive the front wheels.
The diff works on a spring loaded sprague mechanism and an electro magnet. There is a set of rollers inside a cage, inside of the differential carrier/ring gear, and a left/right inner hub under the rollers, which is what your axles plug into.
When 4wd is not engaged, the rollers simply roll over the inner hubs like a bearing and there is nothing driving the front axles.
Once 4wd is engaged, the electro magnet charges the rollers to the inner hubs and makes them "stick" in place to the hubs. The inner portion of the diff carrier/ring gear has ramps that each roller fits into. Now that the rollers are stuck to the inner hubs, the rollers are forced against the ramps inside the differential carrier, and this forces the rollers against the hubs to drive the axles. It should be noted that this only happens where there is a slight bit of rear tire slip.
Because there is no mechanical locking device in the front diff, it could be considered a type of limited slip differential. It is certainly possible to overpower the sprague clutch system and force the rollers to spin over the inner hubs if the front tires are jammed in a way that allows the rear tires to slip under power (like being stuck in rocks).
The majority of failures in these besides bearing failures, occur with the centering spring mechanism that keeps the rollers centered in the ramps of the differential. There is a small dowel/pin in the ring gear that retains a centering spring. When this dowel gets overloaded from too much rear drive over front drive, the pin can break off, which then allows the rollers to bounce around inside the ring gear without any resistance to center them. This then leads to other failures of the sprague cage and armature plate.
The other major failure point is the armature plate with the 6 arms that drive the sprague cage. These arms tend to get bent under heavy loads, and can eventually break off, losing drive between the ring gear and the sprague cage and inner hubs. It is also known for the entire sprague cage to break apart into multiple pieces.
I always tell people that it is best to use the 4WD systems anytime you are on dirt, because it helps relieve stress on the rear drivetrain. I would not say that having 4WD active all the time is harder on the front diff, but most front diff failures are simply due to poor assembly quality, and poor quality factory parts. There are many companies out there offering services to make these diffs much more reliable, including us here at Weddle.
