HOW BAD IS IT!

OK , this maybe two problems , does the side cove have interlocking levers or ball and detent ? if its ball and detent check to see if both detent balls and spring are there , if its interlocking levers check for broken levers . What you are explaining with the noise from the rear could be broken spider gears in the diff
It's the newer style with interlocks. If it's the diff. wouldn't I feel or hear some when I turn the rear wheel? Besides I can't get the trans in neutral so having just said that I'm thinking it's in the transmission itself. Looks like it's got to come out, again I wish I had a lift!

Thanks for all your help guys!