I'm 99.9% sure the following is true:
The plunger does get read, I'm basically 100% sure of this from my detailed characterization of the system. There's a magnet on the end of it, and a hall sensor on the board that reads its position. This controls the dash light directly. There's no motor spin counting etc., it's all about the plunger.
- If user wants swaybar connected, and plunger says the dog clutch is physically connected, then light is off
- If user wants swaybar connected and plunger says it's disconnected, or if the user wants it disconnected and plunger says it's connected, then it's flashing (in both cases, just rock the Jeep side-to-side and it should complete the action).
- If user wants it disconnected and plunger says it is disconnected, the light is on.
There's nothing more to it on the operation of the light. There's no fancy algorithms to determine state, no motor spin counting, it's all about the desired state versus the plunger state.
Now on the operation of the motor, there is indeed a spring preload system in the electronics side so that the motor operates briefly and couldn't care less about the state of the sway bar dog clutch. If it's bound, then the spring preloads in the motor and then when you rock it side to side it mechanically completes the unlock, motor doesn't do anything. The same is true in reverse, if you try to lock it when off-camber the motor pulls the motor-plunger back in, and when you level the jeep out the weaker spring in the mechanical side of the sway bar returns it to a locked position as the dog clutch passes through a flat sway bar. The sway bar takes no electrical action about the state-of-engagement other than controlling the dash LED. You do not need to worry about reading position to control the motor or anything, it's all spring loaded in both directions.
So basically, in both cases it's what you assumed must be true, then somehow determined isn't the case. But actually, it is the case! It's honestly a pretty clever design, it just sucks they actually executed the engineering poorly especially in water-tightness, but the design is pretty good in concept.
If you had a working one this can all be determined easily in the shop by listening to the motor operating, watching the led, and pushing the jeep off-camber to lock it out. The plunger also controls the light even when just the electronics box is running by itself, and you can also observe the motor run and the spring preload system this way. Yours doesn't work so you'll have to take my word for it.