Yea, that's not looking good. I'd have to agree that the rear axle seal has seen better days.

And if the brake cylinder was leaking too and needs a rebuild you should flush out all the old brake fluid and go new. It probably absorbed moisture and like Gary said above will make the brakes soft.

1998 Sportage - Gone.
2004 Honda Civic Coupe.
2007 Suzuki Grand Vitara - She got it.