Pinion Gear Chipped - is it ok to run?

Oldkimmer is right..
While the drive side of the pinion appears to be close, the coast side is waay out of whack, and probably why you have a chip. the coast pattern is in line with the chip.
The noise could be cause one of the bearings, or both, don't have enough preload so the gears are clashing around. (no control) typical sound for loose bearings.
Pin and carrier are wore, so the pin is moving..
If you can't get someone local, who knows gears sets, to look it over.... start over.