first off what year is this bike? has it been in deep water lately? does it have the electric diff lock or the standard flip switch? if its a 08 or earlier all the solenoid does is engage the 4 wheel drive, the front diff is cable activated. assuming that you have tested that its not just the indicator on the dash. I would check the cable that goes to the front diff, make sure that the pin on the left side of the diff moves out when you flip the handle bar switch, if the cable is fine, you might try lifting the bike and turn the front wheels by hand and see if the lock will engage. also check the front diff for metal shavings. If these don't help, your probably looking at tearing the front end apart to see whats wrong. you can get a detailed schematic of the front end of 06 and newer cats at
FRONT DRIVE GEARCASE ASSEMBLY - 2008 Arctic Cat 500 Auto thanks to bikebandit.com
Hope this helps...