The pinion should have no play, the bearings should run with a preload. Spinning will have a light drag.
If there is any play in that shaft no seal will hold the oil in. That diff could well be shot.

I'll have to check when I get home. But I remember there being a little up/down play and a fraction of in/out play. If that is the case, can the pinion bearing be replaced or would a complete rebuild be the recommend?

Thanks,

~ Jon

Clearly the bearings can be replaced. The question is, why did they go bad? As well as, did the gears get damaged.
I doubt you can repair it for what you can buy a used one for.

Decieving or not buy you can see oil dripping off diff mount. CV is all covered too. There is no way you can get oil there from pinion seal. That's exactly the picture I saw when my driver's side half-shaft seal was leaking. New seal fixed that.

Did not mean to disappear. We went camping for the holiday weekend. Yea!! camping in my wife's Volvo. Man, I missed the Montero

I can only think of two reasons for the bearing to go bad. I swapped the rear end last year and the mark that to realign the driveshaft to the diff was wiped off. So, just reattached and off we went. Did not notice any new vibration afterwards.

The other would be on the day the leak started. We were out running up in the snow and I got stuck. It is hard to tell how deep the snow was but my wife could not get out on the passenger side. A couple hours after being pulled out I noticed the leak.

That was the second time getting stuck on that day. Gave the truck a good work out that day. I probably should have aired down.

Alex good observation - I'll double check the seal to make sure it is not leaking.