Yes, they use transmission fluid to apply pressure to the clutch packs that transfer power to the rear.
As mentioned, it relies on hydraulic pressure to engage the rear axle, so with the car off, driveshaft spinning by hand is definitely fine.
Grain of salt, I haven't tested this, nor do I have a car with that AWD that I could test it on.
BUT. There are 2 speed sensors, effectively measuring front and rear output speed, when a difference is detected it should feather the clutch packs to send a little torque to the rear. IIRC, regardless of any other conditions, it should apply some pressure to those clutches, which should spin the rear axle with no load on it.
The only variable here that I'm unsure of, is that when you have it on jack stands, you're presumably at idle. It's possible that with no throttle detected, it won't apply enough pressure to the clutch packs to spin. If you blip the throttle with it in gear, and they still don't spin, you definitely have a problem.
Also, this information covers nearly all 4EAT AWD Subarus (definitely your '95 Legacy), there are a few exceptions that have VTD AWD with a 4EAT. SVXs in other markets, Outback H6 VDC models (this is what I have, which is why I can't test this), and WRXs, maybe others. These models have a true differential, which is also limited by clutch packs.