Yes, both hubs lock. the dash knob is just a vacuum operated way of locking the hubs to the end of the axle and also shifts the transfer case. just locking the hubs manually does not put you in 4x4 becasue it does not shift the transfer case (the magic knob on the dash does that too). A full manual 4x4 set up, the transfer case would be shifted with a lever and the hubs would have to be manually turned.
Unless you installed a limited slip differential in your front axle, you don't have limited slip in the front, just the rear axle. AFAIK, LS was not an option or our trucks in the front axle. So forget about LS in your front.
Locking the hubs (either with the automatic vacuum method on the dash or getting out and turning the knobs) locks your wheels/hubs to the axles. the differential is still a differential. It does not lock the 2 halves of the axle together. The wheel with the least amount of traction will get the most power in an open differential type set up.