well I've got it sitting on blocks while I put in the new tranny and the front spins nice and smooth while the rear is grinding as it spins, if the back lash is normal as i sounds like thats fine but something is totally 
with the bearings and I'm told it is because the gears where set up to tight
I would say that you have a bearing problem, but I am no mechanic.
I have an 85 Yota with a Detroit installed in the rear with 4.88 gears. The Detroit completely changed the way my truck handled and drove. The positive is that it nearly unstoppable (clarification: for the level of trials that I run), I do the difficult but not extreme Moab trails. I only have a Trutrac front limited slip and I drove up Rocker Knocker on Pritchett Canyon the first try, however I nearly rolled it over
Note: my
4:70:1 transfer case is the reason it goes so well. There are obviously negatives with the Detroit that include the following: (1) while turning at slow speeds (parking lots) the truck surges as it locks and unlocks. (2) Increased tire wear. (3) Since I don't have an E-brake it rolls when I park it about a foot before it locks and stops. (4) It tends to engage hard off the line, so I usually let the clutch out a little to take up the slack before I release the brake. (5) If it engages/locks while turning it can really sound horrible when the teeth finally mesh completely, almost like a broken axle. I figure that these are all a worthwhile trade for having the quality of the Detroit where I know it is as reliable as anything on the market. Everyone that I know with a Detroit experiences the same things, automatic transmission seems to smooth things out a bit. Just my
