^^^^^ rebuilding it if not done yourself will be expensive. much more than swapping a used 8.8

 

True, but you never know what you are getting when you buy used. And, if the new one has a LS, who's to say the clutches aren't already worn out?
My wife's 02 explorer has an 8.8 with the same type of noise problems. Because it has IRS I can just swap out the whole unit pretty easily. So I put in a used one from a junkyard... 4 different times in the past 2 years. I only paid for the first one because I bought the extended warranty. Total it cost me $400.
So now that it's making noise again I decided to just rebuild it myself. I called a shop that specializes in rear ends and they quoted me a total of $450for all the necessary parts. Then they quoted me $650 if they do the rebuild themselves.
Now that's rebuilding the current LS, and the OP would need to buy one, but a lunchbox locker could be installed in the current open carrier for not too much money.
In my case, If I had spent the extra $250 up front, I wouldn't be doing it again now. So, overall I would have saved money and I wouldn't have had to swap the thing out multiple times.
Also, I have the 8.8 in my 04 XLT 2wd with a detroit truetrac and it works great.
My suggestion to the OP would be to call around to some specialty shops and think about a rebuild instead of puting extra $ into a used 9.75.
Just my 2 cents. Good luck with whatever you decide!

 

What ford norseman said 100%. Throw a little money at it and be done with it.

 

but will my axles themselves be messed up if the axle barrings are shot?

 

That depends on how bad you let the bearings get before you fix it. Unfortunately, the only way to know whether or not they are in good condition is to take them out. I doubt that your axle shafts are bad yet, but I wouldn't let them get any worse.

 

well it isnt very loud right now. i was thinking of putting in 3.73s but the wheels im putting on the tires are like 1.5 inches shorter and may take away all of my mileage