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It's in the transmission controller. As soon as you flip the PTO switch, the transmission shifts to N if it isn't already there. I doubt it has to be in neutral for it to function mechanically. I think maybe they do this so you can't run out the winch cable and then overload the cable or...

The standard hydraulics for the cab, spare tire, etc are air over hydraulic and wouldn't be enough. The winch trucks have a transmission mounted PTO hydraulic pump to run the winch. One downside of that system is that the transmission is locked in neutral whenever you engage the PTO. If you...