Lots of questions, but here you go:
Yes it's already running in AWD high range all the time. In this mode, the center differential is unlocked.
When you shift the transfer case into low range (shift the transmission to neutral first, thank you), it automatically locks the center differential (this will be indicated on the dash display).
The knob on the dash control the electric differential locks for the front and rear axles. If you're just planning on using it on snowy roads, I would recommend that you leave them both off (unlocked) unless you need the extra traction. Driving on snow/ice with locked axles can get you sideways in a hurry before you even know what happened.
The buttons next to the shifter control the transmission's electronic shift points. The power button holds the transmission in gear a little bit longer when accelerating to let the engine rev a bit higher in each gear. The transmission will also shift harder. It's not as comfortable of a ride, but it's handy for mountain passes and towing. Some people report slightly better gas mileage with the power button on since the transmission doesn't slip quite as much. I would recommend leaving this off in the snow as a hard transmission shift could cause the wheels to break traction.
The '2nd' button is valuable for snow and sand. When engaged, it essentially forces the transmission to start out from a stop in 2nd gear rather than first. This reduces the amount of torque applied to the wheels, and reduces the chance of spinning the tires and digging yourself into a hole. I would not use it for everyday driving.
Go to
http://www.ih8mud.com and check out the 80-series forum for more information than you will ever need.