Ya...the oil retainer is likely scraping the collar. You can probably get away with leaving it out and problem solved. You can also try 'clearancing it' somehow.
A pattern check will make it real obvious if you have the V6 or 4 cyl gears....but a V6 one has a long pinion head of about 1.666" and the 4 cyl version is 1.530 abouts.
ZUK

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01 Taco xtracab V6 auto TRD white
mostly stock
88 Runner/V6/auto/31"/5.29gear