[hatzie]

IIRC on the NP208. 2WD is all the way counter-clockwise looking straight at the shaft and 4LO is all the way clockwise.
Pattern turning from 2WD is 4HI, Neutral, and 4LO.

GM calls the shift motor shaft encoder a "Transfer Case Range Select Position Sensor". They're around $30 from AC Delco.
The electric motor and the attached gears positions don't matter. The motor and the gears don't have any stops.
For some reason the shift computer doesn't protect the shaft encoder from traveling beyond its' stops when you have it plugged in while it's not connected to the transfer case. This breaks the encoder. My guess is that's what happened. It's probably similar to the motors on the HVAC doors. The controller does some kind of calibration as soon as you give it power.

When you re-assemble the shift motor you set the output gear in Neutral by lining up the matchmark indent dot on the rim of the output gear with the groove on the case next to the wire entry for the encoder.
At 5:16 - 5:18 in the video I linked you can see the Neutral matchmark dot at around the ten or eleven o'clock position on the gear. Look next to the oddly double drilled hole in the gear. The matching groove is not very visible in the video.

The groove is in the housing casting right next to the encoder wires that run under the output gear.
Since the Encoder is driven off this gear it'll be set in Neutral when you line up the matchmarks.
The electric motor drives 360°. The only thing you need to worry about is lining up the output gear matchmarks. I'm not sure why the guys in the video thought it was neccesary to matchmark the gears and the housing with paint probably because they weren't setting everything in Neutral.

Chock front and back of the front wheels.
Lift the rear wheels off the ground. If the propshaft yoke is still out of the transfer case don't bother lifting the rear.
Shift the transmission out of park so you can turn the transfer case with the rear propshaft...
Set the TC in Neutral by turning the shift shaft all the way counterclockwise and then back two positions. It's rumored you can turn it with a 12point socket or box wrench. The wide spline should be near the 6:00 position. Seat and bolt the shift motor/encoder on without plugging it in.
Once it's assembled plug in the shift motor and try it out. If it's still complaining clear the error codes with your Tech 2 or bi-directional scan tool and try again. You should make sure the TCCM is flashed to the latest update... there's an update dealing with C0237 errors and updated calibrations for the AWD.