The simplest answer; dollys were made for front wheel drive cars, ONLY! If you are going to tow anything AWD, 4WD, or RWD on a dolly, remove the driveline to the axle that is on the ground. I can't say this for every transfer case out there because I have never torn one open to see how they tick, but for my electronic shift AutoTrac II, it goes from 2H into 4H, then into neutral. Transfer case neutral is for flat towing, all 4 wheels on the ground. Neutral disconnects the drive gears from the input shaft of the T-case. My T-case shifts into 4, then neutral allowing the full T-case to be oiled while it is running down the road. The guy who's tranny caught fire was probably because the front driveline was not able to spin with the back and it gernaded internally and heated up to the burning point. It takes a lot of heat to burn the aluminum, but it takes even more of the right kind of foam retardant to put it out. I have doused enough car fires in my last 14 years on the VFD to figure that one out.