Most transfer case's low range is somewhere around 3:1...maybe a bit less (2.7:1).
That means when you're doing 25mph in LOW range, the transfer case is spinning just as fast as it would be at nearly 75mph in HIGH range....
Most transfer cases use a chain of sorts, they simply aren't designed for high speed (prolonged or momentary). You'll have MUCH less wear driving around in 1st or 2nd in high range than you would in 4th or 5th in low range.
It's very rare I even put my 4x4 in Low range...only it "techinical" areas where extremely slow speeds are needed. Otherwise, 1st/high is more than low enough.
As for engaging your 4x4 with the hubs UNLOCKED...
Everything is turning like it would in 4x4, but there is no resistance on the front driveshaft/differential--because the hubs aren't locked in. It's not designed to function like this, and again...you can burn up the transfer case.