I have a 96 Chevy Z71 and it cranks in the on position and the starter says engaged after it starts

Does the starter gear kick back out once you shut the motor off. Odds are you will need to pull the starter to fix it so I would start by pulling the cover off the bottom of the flywheel. If the starter gear is still meshed with the ring gear check for binding, if you can push the starter gear back into the nose of the starter easily you will need to pull the starter and check the bendix (solenoid/plunger that slides the gear out into the flywheel w/ spring return). Also might want to check the crank wire from the truck (small stud on the bendix). It should only be hot (+ 12 volts) when the key is in crank, if it has power in run the ignition cylinder needs to be tested. To test the bendix ground the body and apply power to the small terminal, the plunger should fire and return once power is removed. You can take the bendix apart and repair or get a new (or rebuilt starter). If the starter gear wont slide back in try turning it slightly by hand you want a little play between the two gears, if they are meshed to tight you will need to install shims between the starter and engine, if this is the case the gear should recoil back into the starter if the starter bolts are loosened. If the starter gear is seized to the starter motor shaft the starter can be removed and try lubricating and working it back and forth. You already know the starter turns so avoid applying power to the large post on the starter and always disconnect the battery before working on the main cable going to the starter.