Yes, if he removes the rear drive shaft the Jeep can be towed with the front wheels on a dolly with no problems. The transfer case does not have to be in Neutral, the transmission does not have to be in gear.
Seems to me, though, that considering the fact that a 5000 lb. capacity towbar is available from Walmart for less than $175, (that is what I use) or from Harbor Freight for less than $100, and magnetic tow lights are available from the same sources for $20 to $50, and a Jeep can be towed 4 down with no problems (read and follow the instructions in the Owner's Manual), it doesn't make sense to use a dolly.
But, again, it can be done with the rear driveshaft removed