Does anyone Know If you can dolly a car off the back of a 16ft flat trailer while trailering a car on the trailer. kinda like piggy backing the second car???  

That would depend on what state you live in or what states you travel through. Check with your local DMV to make sure it's legal-in some states it is not. or, check http://www.readybrake.com/state_laws.htmlto see what your home state allows.

I do see some issues with the piggy back in that it will be difficult to hook up and you won't be able to back up. there is also the issue of weight- is the rear of the 16-ft trailer strong enough to handle the tongue weight? maybe worth a try but definately a bit sketchy.