I towed the van in a dolly. Now my AWD light is on saying it's not working. Can I remove the rear driveshaft. I'm sure it not recommend but since it won't kick in the AWD can I remove the shaft

You can not tow any AWD on a dolly, ever. You can remove the drive shaft but the transfer case is your problem. You smoked it when you towed it on the dolly. The transfer case is what you need to remove.

Ok I understand next question can I remove transfer case and drive the van? I ask because passenger side rear wheel does not spin freely when up in the air. Driver side down. Other way around driver up passenger down. Spins freely.

I'm not positive if you can remove the transfer case and still drive the van. I've never looked into doing something like that. You may have ruined the transmission as well. I'd have a very good REPUTABLE mechanic look at it before you do anything. You might get lucky but you might have to get a fwd transmission out of a junkyard too. Montana, venture, rendezvous, Aztec and silhouette are all the same