Now for the bad news. I knew I had a seal failure on the drivers side rear axle, but tear down revealed the problems to be much greater than that. At some point, some one drilled new holes in the axle flange (equally spaced, all the way around, effectively doubling the number of holes). they also drilled new, matching holes in the hub, again located between the existing holes. the only problem is that they didn't do as well locating the holes in the hub. The hole circle is offset, relative to the center of the hub, the holes are oversized (compared to the originals), and when they were drilled and tapped, some of them actually penetrated the center of the hub. Since the hole circle is offset or eccentric, it threw the axle shaft offset as well, causing it to wear on the inside of the axle housing. Fortunately is appears that the axle shaft was sacrificed rather than the axle housing. There were globs of axle shaft metal fused to the inside of the axle housing, requiring a good deal of dremel work to grind them down.
I am pretty sure that I have an extra axle shaft somewhere in my stash of parts, but I know that I don't have a spare rear hub lying around...
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Here's a pic of the buggered up hub, and axle shaft:
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