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I have heard of this. It only pertains to the D300 and is for lubrications, otherwise the rear tailshaft bearings will run dry as they are lubricated by oil riding up the gears. The front shaft sits in the oil and will provide the "sloshing" action needed to throw the oil around to keep everything wet. I have also heard of people retrofitting the rear internals with paddles to move the oil around to do it's job. Rather than doing this, just disconnect the rear driveshaft, it's a lot less drag when towing.

JEEPN
'81 CJ-8 Scrambled!
GM151/SM465/NP205 twinstick/7"Lift/33"TSL's/IHC D44's 4.10's Lock'd
 

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7,901 Posts
Yes, but how are you going to over fill the transfer? It'll all leak out if you put too much in it. Maybe through the breather, but what a PITA that would be. As to the 2WD, yes, but like you mentioned it'll take more to tow it, then you're turning the tranny as well (in neutral of course). The easiest is just to lock the fornt hubs and allow the front shaft to turn, or better yet, undo the U-bolt straps and hang the shaft out of the way.

JEEPN
'81 CJ-8 Scrambled!
GM151/SM465/NP205 twinstick/7"Lift/33"TSL's/IHC D44's 4.10's Lock'd
 
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