The correct and ONLY way to flat-tow any Wrangler TJ is with the manual transmission in gear or Park if it's an automatic, the transfer case in Neutral, and the ignition unlocked so the front tires can turn to follow you through turns. The transmission must
be in gear or in Park so it can't spin since there's insufficient lubrication for the transmission while being flat towed. The t-case is in neutral so the rear axle doesn't turn the transmission's output shaft via the transfer case.
Yes... transfer case in neutral, tranny in gear, and ignition switch unlocked but not 'On'. I don't care if any of that doesn't sound right or not, it's correct.