Hiya bud,
Better to ask, than to break something, I reckon... We've got a nice page on the 4x4 system here
/wiki/index.php/4WD_FAQ/Guide.
You don't have auto locking hubs, so there's no worry there. The B-series hubs are permanently locked to the axles so they, and the front diff, are always turning. No need to do the reverse to unlock thing either.
The button controls a vacuum actuator affair to complete the link between the gearbox and the front axle, as normally you're only rear wheel drive. The lever next to the gearstick is only for selecting either high or low ratio box once you've pushed the button to activate the 4WD system, in normal driving leave it in the 4High position. the "shift on the fly" means you can push the button without having to stop first, up to speeds of 60kmh I believe, although another B-series driver will need to confirm. You'll still need to stop to shift from 4High to 4Low and back.
Definitely do not engage the 4WD system on any grippy surface as there's no cxentre diff, hence no allowance for axles going at different speeds when cornering, and you run the major risk of breaking things through "winding up" the drivetrain.
LSD is unlikely, but you can check the VIN plate in the engine bay of your car, the code G80 signifies you have got an LSD.
You're welcome to come along with us guys laning, or to our picnic site if you want to know more,