Am I justified in my frustration?

I cannot see any way in hell the bearing is rusted bad enough in the housing to cause that....so.....here's my guess. The axle splines have to be super rusted to the side gears. Try several gallons of white vinegar and fill that puppy up and let it sit several days and try it again. If you keep going like you are, it really WILL be a broken POS. As it is now, you might can still make it good. Trust me when I say, vinegar works wonders.