Del, lets start from the beginning
1. What year is your Land Cruiser?
2. Does it have an original t-case? (if unsure a quick picture would help)
3. Do you have a low-range shifter on the floor? (next to trans shifter)
4. Do you have a tachometer? If so what are the RPM's is showing at 40mph?
Vacuum 4WD engagement was common Land Cruisers in the 60's, judging on your pocket door plate your Cruiser was a 3 spd originally. Now other than that nothing on your dash looks OE, the 4WD engagement is different, the key is different, the gauges, etc. A bunch more pictures would be helpful because its likely we are not dealing with a factory-esque issue so much as a problem with a conversion that was done.
That push-pull knob on the dash should only control 2WD to 4WD operation, not 4HI - 4LOW, so while its strange you get no gear when its pushed in, it isn't necissarily the culprit of your speed issue, unless its somehow connected to your TC hi/low shift mechanism. The factory vacuum setup was this way, when you pulled it hi-low it automatically pulled he cable into 4WD, but you could pull just the cable and get 4WD.