On my cherokee I don't have abs(i don't think) no light comes on but I have the Dana 35 rear and on like three websites I've seen that the dana 35 was only available with ABS. Is this possible

I am in the same boat as you. Under the hood I have the abs controller and everything, but I have no abs light during start up. I think the bulb might be burnt out.

Well my brakes make a really loud knocking in the rear I didntnknow if that has anything to do with it

If there is something wrong with the abs system the abs light would be always on I'm pretty sure but I'm not positive. You really should pull the rear wheels and see what that noise is.

Also check your rear sway bar bushings (if you even have a sway bar) before I took mine off every time I hit the brakes and went through a corner I would hear a loud knock.