hey did you ever get an answer to this? the general consensus i'm reading is that it's suppose to be transfer case in neutral and transmission in gear, but I had to flat tow my YJ 17 miles at about 30 mph with the transfer case in 2wd (the linkage is seized, moving it to fix everything up) and transmission in neutral. Do we know why it is bad for the transmission to be in neutral?
1993 Jeep Grand Cherokee, 4.0 liter 5.5" lift, 33x12.5 mud terrains, black steel pro comps, 231 tc, 3.73 gearing
1996 Jeep Grand Cherokee, 4.0 liter, 242 tc, stock
1987 Jeep Wrangler, 4.2 liter, stock