Hello,
To be honest, I have never used Report Distribution, except installing it for training purpose, but in fact never really used it.
Nevertheless, by looking at the documentation, and how you need to configure it, etc... I think you must use it on the same box as OnDemand.
BUT, it doesn't mean you cannot. For example, lots of people are using PDF indexer in another box than the OnDemand server for performance reasons.
So maybe if you have a spare windows server around that does nothing, you might try to install the CMOD server components, create a remote entry to your CMOD Test/Dev environment (I assume you want to test it in Test or Dev, and NOT in Prod first!), and do all the configuration needed from that Windows box, and all the reporting.
So it's really trying by testing!
Maybe other people have other experiences... I hope someone can answer you better than me!
Cheers,
Alessandro