After much contemplation and examination of the hub shown above, the only thing I can find that would have caused the inner wall to bulge is the compacting of the black sealant used to seal the locking hub. The bolt holes have an accumulation of the sealant in the bottom of the threads, which is where the bulging occurs. I never thought about that being a problem. And it's probably worsened by the multiple times I've pulled the manual locks for various projects. I resealed them every time, not realizing the compound was gathering inside of the holes. Factor in the heat from braking and it might just be the perfect storm that caused the problem. I can't see the torque from running with the hubs locked being the problem, as I have very little time driving that way. And I suspect that any looseness in the bolts would produce an ovaling of the holes, where the bulges would require the tips of the bolts to be pulled inward, towards the bearing. That makes no sense to me because all of the forces applied by the drive system are rotational. That said, you should be cautious when using a sealing compound like RTV or a canned compound (I used the latter) so it does not get inside the bolt holes of the hub. Enough material building up might cause problems like I've encountered.

I have new hubs and parts to install. I will likely use a small amount of RTV this time, only applying it to the o-ring area of the locking hub so the excess can't get pulled into the holes during assembly. I'll be sure to post a follow-up to this after it's all back together and I've got some miles on the odometer.

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