A friend has a 1999 2500 CTD 4x4, and he had to purchase a new chain for his transfer case, as he was told his had stretched about 1". He had other maint done at the same time.
Is it common for the chain to "stretch" causing problems? Is this something I should look at as preventative maint?

 

As your friend and others found out the chains do stretch.
I really don't know what you could do for preventive maintenance short of replacing the chain at a unknown mileage interval.

 

What would the signs of this happening be? Mine has started making noise, but mostly when letting off the accelerator or coasting downhill, like there is slack being taken up. Also, if I lock it in and turn the front driveshaft by hand it turns probably a half inch or so before the rear shaft begins to turn. I suspect a stretched chain as well, but want to be prepared with parts before I dig in if possible since this is my DD.

Thanks

 

In 4wd you start hearing a thunk or slap when letting up all the way on the accelerator when they're stretched out.

 

Running in 4WD on solid surface is gonna strech the chain sooner. Read the owners manual on 4WD operation.

 

As it gets really bad, you will hear it in 2wd also especially when next to barrier walls. If you don't fix it, it will eat through the case. Trust me, I'm on my 3rd 271.