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Is it possible for the nut that holds the rear transfer case flange on to completely come off when driving down the road?


Yes, its very possible. It happened to me about 7 years ago, going up highway 50. Pretty ugly. The 'staking' came unstaked, and it slowly backed out.
Luckily, the damage was minimal, just needed to replace the TC output shaft, TC speedometer gear and the drive shaft. Had to be towed home though (AAA 100-mile tow is a wonderful thing).

Rick
1984 4Runner