Or 2wd HI. It should be able to spin free, that's how you make a sharp turn on pavement without bind.
I honestly couldn't tell you exactly what is going on in the TC in neutral as I haven't had one apart but I'd think everything would be unlinked from the trans. Front and rear should be able to spin separately and should have any rotational torque applied to the output of the transmission.
But if something in your front end is locked up, front diff grenaded, wheels on ground, etc. you aren't going to spin that shaft without also spinning the tires.
What do you have going on?