Well I ended up changing the rear wheel bearings, tore apart the diff, and serviced the oil for both the tranny and rear. All is well w/ the diff and the tranny(god i hope). The rear diff oil was a greyish black, and a lot more than was suppose to be in there I believe. It wouldn't even drain completely through the drain hole, turned out to be a real messy and stinky task! But no more awfull noises and my tires aren't locking up in neutral anymore so way worth it.

I did order new bearings and seals for the diff though, figured w/ the diff oil looking like it did it probably needs new seals. Thank u all for your suggestions.

 

Check the little accordian like vent tube on the diff as well. I have torn mine before and not known about it until I got water in the oil as you described.

Also, it is normal to get some fine metal shavings in the oil magnet when you change the oil. I usually remove the drain then the filler plug and let it sit over night to drain.

SJ

 

Ya the little accordion guy is good. Glad to hear that shavings r normal, was a little worried.