Check the axle shaft to see if it is warped, but more likely the housing is bent on that side. Running it that way will prob kill the side gear in your spooled diff. If I was you I would be either looking for a new housing, or you could always be ghetto and try to warp your housing back into shape by welding a few beads on the outside of the curvature...that might make it for a weekend... 
No side gears in a spool.
New question how do I tell if it is the housing? there is very little to reference to that is straight. guess I will build an alignment jig. probly first throw a different axle in that side to see if is gets better.
Wayne
