I'd add that it's not the transfer solenoid that could be failing; instead, it could be the transfer valve. The solenoid controls pilot pressure to the transfer valve (spool type). It's the valve that actually controls the line pressure application to the transfer clutch piston. The solenoid could be working fine, but the valve could be sticking in its bore, and not responding properly to the variable application of pilot pressure.
But I'm still puzzled by the P1706. There's nothing that suggests it would be triggered if there's a significant difference between the front and rear speeds. A few years ago I was indirectly involved with a non-functioning rear wheels problem with 2006 Forester. Front wheels would spin while rears didn't do anything. Neither the owner who complained about the problem nor the technicians working on the car and experiencing the fault, found any trouble codes or any warning lights coming on. (It turned out the transfer clutch plates were toast, literally (melted).)
If, in the current case, there's a problem with the wiring in, or to, the solenoid such that it went open circuit at operating temperature, that should trigger a code, specifically, P1707, AT AWD SOLENOID VALVE CIRCUIT MALFUNCTION. Instead, the only code appearing P1706, and that's related to the rear speed sensor, not the solenoid. Based on the FSM troubleshooting for P1706, that can be caused by a bad connection to the sensor or the sensor itself (e.g. weak or no signal). I haven't found anything that suggests the P1706 could be triggered by a difference in the front and rear speed signals.
Incidentally, in this thread
, ntippet substituted a manual, variable, control of the duty cycle to the AWD solenoid, and attached an equivalent load to the TCM so that it would still send out a control signal according to the driving conditions. The manual control was set to zero, so that the solenoid remained off. The car was then driven on an ice-covered road. The front wheels, as expected, broke away and there was a significant difference in the front and rear speed, but no codes were triggered. Granted that was with a 2004, but that TCU had the same code available, i.e., P1707 and P1706.
Monitoring of the transfer clutch apply pressure would be the way to determine if the cause is in the valve body or in the clutch. But that's a challenge to do when the problem is somewhat intermittent.