In the last 6 weeks I have towed the CJ 5500 miles around the west behind the RV and another 3k before I get home. Before that probably more than 10k in over 20 years. Disconnect the rear DS, unlock the front hubs and it makes no difference where you leave the tranny and TC levers. But to be safe I put the TC in neutral, reach under and make sure the front DS turns freely, then there is no worry. Just make sure your front and rear wheel/axle bearings are in good shape. Last thing you want is to look in the rearview mirror/camera and see a flaming pile of Jeep behind you. I tow with a 10 ton motor home and use an auxiliary brake (Brake Buddy). Tow behind a pickup or SUV and you can easily have the tail wagging the dog. I know, I flat towed it 15 years behind Safari van with no auxiliary brake. Many states require aux brakes. And I have a checklist on my phone I go through every time I hook it up.
I used to just disconnect the rear DS and hang it on the muffler, but now I remove it, wrap the u-joints in 2 layers of electrical tape and stuff it in a piece of 4” PVC pipe with a cap on one end and a screw plug on the other and lay it on the rear floor. And when I replace it I torque the strap bolts to 16 ft-lbs. Takes 10 minutes in or out.
And I am still using the original a-frame tow bar purchased 20 years ago. Break away cable is not shown in the pic. I have no idea why in the world you would leave the front hubs locked, leaving everything to spin when the purpose of the hubs is to unlock everything.
I flat towed my Jeep for years everything in neutral. 350 miles from my house this spring somehow the Jeep went into gear not sure what happened, but from the cracked bell housing to the yoke of the rear end was grenaded. In Milwaukee I had to replace the bell housing, transfer case, tranny OK?, the driveshaft and yoke. Believe me take the 5 minutes or so and disconnect the driveshaft. It's an expensive lesson. And I did make sure everything was in neutral.
Browsing this plus RV forums I have found many incidents of unintended damage, as above, caused to the toad by forgetfulness, mistakes, etc. I have towed a Sidekick many, many miles without problems but have forgotten to put in one pin when distracted by a park employee complaining about me doing the tow bar hookup on the grass. Thankfully no damage, having been alerted by another driver. Have blown a tire on the toad and damaged body. Have tried to start towing before setting all shift mechanisms as required. Yes the initial expense is higher for the trailer but then you have at least partially offset the cost of the trailer and it is useful for so many other things. At my age (69) I certainly don't want to crawl around on the ground twice per trip for disconnecting a drive shaft.