I second Mitch's diagnosis. I have a 5-speed Eagle, and it once had a problem that felt just like a slipping clutch: the engine would rev up without the car going faster.
It turned out that the hydraulic linkage that moved the transfer case lever was malfunctioning, and leaving the lever in the in-between position, resulting in the dreaded 'false neutral'.
The good news is that the temporary fix is simple: simply disconnect the activating rod from the hydraulic cylinder and 'hard-wire' the transfer case lever in the desired position; either fully rearward for all-wheel drive or fully forward to disconnect the front axle. Y'all can probably do it with hand tools on the side of the road.
Good luck,
JB
The transfer case actuation is vacuum-operated, to the best of my knowledge, on all of these cars after '81 regardless of the year. I want to say '85 was the first year of "shift-on-the fly" 4wd where the little 4wd lever/vacuum switch did not have the lock mechanism. I suppose it could be possible that someone's knee could have bumped the lever over slightly to the 4wd side, setting up a false neutral as it's been stated, or the switch vibrated itself that direction after a couple of days of driving.
For all we know, the little plastic shift lever bushing in the transmission shift lever from the shift linkage half-disintegrated and the shift lever is wandering around not knowing where it's supposed to be.
Our hopes would be that it could be something that simple, or it could be possible that the forward clutches in the trans just gave up the ghost due to the heat and stress. Without knowing whether the car had any movement at all under any gear including reverse, it's hard to guess from the description, except to guess that bad clutches would probably not be an immediate problem but a gradually-worsening problem.
Some transmission-related questions to ask your daughter and boyfriend:
1. Does the engine only start in Neutral and Park? Is there more play in the shifter handle than when they started driving? A "no" and "yes" to these questions could imply a shift linkage problem.
2. What is the transmission fluid level when idling in Neutral on flat ground? What is the color of the fluid? Does it smell burned?
3. Put the car into each gear individually, including reverse. Does the vehicle move in any gear and if so, which one(s)?
4. Any massive red puddles or obvious leaks to suggest that they're suddenly losing copious amounts of ATF?
5. When the car is cool, remove the radiator cap. Is there any transmission fluid floating at the top of the radiator? If yes, the in-radiator trans cooler has failed and both systems are now contaminated.
This is all that springs to mind right now as I'm pondering the problem description, hopefully others can continue to chime in...
David