Actually, I just got off several of the Chevy forums and this is a very common problem that is caused by multiple faults. You can do a Google search for "S10 4wd indicator problem" and similar terms. Quite often, it's caused by a vacuum relay on the right front axle underneath the battery. Evidently this vacuum relay is supposed to have zero vacuum in 2WD, and manifold vacuum in 4WD. In some cases, the relay is bad, and in others, there is a vacuum leak.
I did see several replies in these forums where people just ignored the indicator light and shifted into 4WD and back again as needed with no negative effects at all. I'd certainly look for that vacuum switch and check it out.
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