One very common problem on these trucks is that the snap ring securing the rear output shaft is brittle and breaks off inside the tailhousing of the transfer case. This allows the output shaft to slide fore-and-aft in the case, which makes a horrible grinding sound and eventually damages things. The noise is most pronounced as you go over bumps and the driveline flexes.
It is easily fixed -- disconnect the driveshaft at the rear end and pull it out of the transfer case, remove three bolts and pull the tailshaft off, inspect snap ring. The snap ring can be replaced with a less brittle one from a 727 Torqueflite transmission.
This may or may not have anything to do with your problem, but is quite common.
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Today's Featured Article - The Niagra View Mobile - Powered by a 1959 Ford Tractor - by Mark Massey. In 1959 the Niagara Frontier Transit Inc. of Buffalo, New York designed and built six Viewmobiles for the Niagara Frontier Sightseeing Inc. for use as a sightseeing ride at the Niagara Falls State Park, Niagara Falls, New York, powered by a 1959 Ford 611 Tractor.
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