Hi Bandaid,
We have been towing 4-wheels-down since 2007. It works very well for our vacation style. The issue towing this way is that you cannot back up. The only exception is if you were straight in-line and even then you might be able to back up only 20 feet before it binds up. With my wife and I working together in an emergency, we can separate the vehicles and have her drive away in the Liberty in 45 seconds. We can hook back up afterwards in a safe location in 3 to 4 minutes.
I don't know anything about a tow dolly. The only reason why I personally would use one is if the vehicle cannot be towed 4-wheels-down and I was taking a one way trip, like for example moving to another home far away. I suppose a snow bird trip could be another application.
I would sell off a vehicle that can't be towed 4-wheels-down, and buy one that can, just to have the setup I appreciate.
Here are the two vehicles I have towed with our motorhome.
A 2006 Jeep Liberty with automatic transmission, and with a 4x4 transfer case. Towing from 2009 to today
A 2000 Toyota MR2 Spyder with manual transmission. Towing 2007 and 2008.