Has anyone ever disconnected the rear sway bar for off-roading? If so how do you do this?

Absolutely - and a good idea, too. Disconnecting the rear sway bar gives you additional articulation (allowing the rear wheels to droop further, remaining in contact with the ground vs. up in the air). Another reason is when using aftermarket shocks, which tend to be thicker than the stock units. When off-roading, the sway bar could come into contact with the passenger-side shock, causing dents - or worse.

This is accomplished by removing the connecting rod end on the sway bar on each side and let the components hang. After off-roading, be sure to re-connect these items.

If you off-road often enough, purchasing a set of "sway bar disconnects" might save you quite a bit of time and frustration. They replace the stock setup with an easily removed version that utilizes captive pins rather than nuts. Pull these and the connecting rod out and go wheel!

Some folks swear that removing the rear sway bar altogether doesn't change the handling of your truck ON the highway. You'll have to be the judge of that yourself and based on how you drive.