Yep, the shaft/front diff. always turns. AWD selected just energizes magnets in the front hubs to attract armature plates allowing the rollers in the hub Hilliards to cam up and engage when the rear wheels slip a little in relation to the fronts. As soon as the rotational speed equalizes or is the same between the front and rear the Hilliards disengage. That's why they call it "On Demand AWD"...It only works when needed. Even when the switch is on it is still 2WD until the rears slip a little. If working right, you don't even feel it engage and disengage. You can check and test everything as is (power to hubs, ohms of magnets and fluid etc.) but you will need to have it all hooked up and all 4 wheels off the ground to really test functioning. You'll need to change fluid in the hubs and probably flush them a little for sure if it hasn't been used/changed in a while.
#15 is magnets wires are tiny and run out of the strut up to under handlebars...should get 12v when energized and approx. 27 ohms resistance when tested.
#15 here is the plug for drain and fill with ATF or Polaris Demand Drive or 10 weight tractor hyd oil to 3 o'clock level (1/2 full). #4 is the armature plate which must be smooth and flat for proper function with tabs engaged in notches in Hilliard cage when assembled. The inset box is the Hilliard itself with rollers and a very fragile garter spring #12 holding the rollers in place. All must be clean and intact with correct torque on the bearings and correct fluid at right level for it to work. It's a little tedious to get perfect but pretty bullet proof when set up correctly and maintained. If you need to take them apart, remember there are 4 (four) taper bearings on each wheel/strut assembly (8 total). The inners and outers are slightly different sizes so pay attention. They must be torqued using a specific sequence to get it right. You should think about a manual if you plan to keep the machine.