The tip off is the funny looking S spring thing in the middle. It is the spring that applies pressure to the clutches. As others have said, you can still have one wheel peel if the clutches wear out. The clutch pack kit to fix it sells for $70 -$108. That does not include and bearings or gears.
It helps if you have a good manual but the instructions that come with
the kit are pretty good. The part number is F5AZ-4947-BA. It lists for a little over $70 at Ford but Mean Mustang Supply or Summit Racing has it cheaper if you can wait. Get about 3 quarts of 80w-90 gear oil. If you use synthetic you probably shouldn't use friction modifier. If you want absolute max trak-lok action and are willing to put up with some unsettling noises from the rear end, don't use any modifier at all. It just makes the clutches more slippery so they don't chatter. I chose to use it and I'm glad I did since this is my daily driver, autocrossed and dragraced for fun. Anyway, here goes.
1) Jack up the rear end and support with stands.
2) Loosen the diff cover bolts, removing all but the top two so you don't take a gear-oil bath
3) Pry the cover loose and drain the rear into a pan.
4) When threat of bathing is gone remove the top bolts and pull the cover off
5) Scrape/wipe out the bottom of the diff.
6) Now is a good time to soak the new clutch discs in friction modifier, the need to soak for 20 minutes at least. If not friction modifier, at least gear oil -- you don't want to put them in dry
7) The shaft going through the center of the diff is called the pinion shaft. It's got a lockbolt on one end. Undo the lockbolt and push the shaft out. You’ll only want to push it in a little bit so you can still rotate the assembly and pull it out toward you. There isn’t enough clearance to push it all the way through or to turn the assembly if you’ve tried.
8) Remove the wheels and brake drums, leave the other brake hardware alone. Push the axles inward, and you'll see the c-clips that hold them in place. Remove the clips and pull the axles out gently -- don't torque the bearings on the way out and don't let the axles hang, just remove them.
9) Get a grip on the s-spring and pull it out. You may need to punch it with a hammer to get it started, and keep a good grip on it when you remove it you don't want it zinging around.
10) The gears you see are the pinion gears and the side gears, called spider gears. Rotate things until the spider gears pop out, then pull the pinion gears out too. Inspect for damage.
11) Now you can simply slide the clutch packs out, use the tabs on the plates if necessary. Make sure you get them all out including the shims.
12) Reinstall the clutches and steels in the proper order, using a shim at least as thick as the ones you removed. You want to use the thickest shim you can while still being able to get the spider gears back in. Forget about using the set-up tool and all the special measurements, if you can get the spider gears back in you're all set. Note: Each clutch pack is made up of a series of Frictions and Steels and in the factory order they go F-S-S-F-S-S-F. However, if you re-use the best two of your old Frictions in place of one of the new Steels you can re-stack them in an order that makes the diff lock better, which is F-S-F-S-F-S-F, which is the same number of total elements. You may have to trial assemble it a couple times to get the right shim so it's just loose enough to get back together, barely.
13) To get the gears in, it helps to have a helper turn the now-temporarily-installed driver's side axle while you lock the passenger-side pinion gear in place. The spider gears will squeze into place. They are perfectly aligned when you can get the pinion shaft back in.
14) Re-install the s-spring. This can be difficult. Try holding it against its slot with a pair of channel-locks to get it squeezed down a bit while prying it in with a piece of 2X4 using the swaybar as a fulcrum. Alternately, do the same but whack it with a mallet. It should pop in. If it doesn't, try using a 1-1/2 inch hose clamp to squeeze the spring so you can insert it. Then cut the clamp and slide it out.
15) Re-install the axles by pushing them all the way in, installing the c-clips, and pulling the axles back out against the clips which are now recessed in the housing and locked in place.
16) Reinstall the pinion shaft and make damn sure you put it in the right way so the new lockbolt can be installed. And do not use the old lockbolt.
17) Use gasket maker on the diff housing and reinstall the cover.
18) efi85gt posted a terrific tip for filling the diff. Forget the fill plug. Let the rear end drop as low as you can and remove the little vent cap on the top of the right side axle tube. Clean the area around it carefully and you’ll be able to fill it through this hole with a fraction of the stinky mess you get when you use the “fill hole”. But you should still remove the fill hole bolt so you know when to stop filling, which is as soon as it starts to come out that hole. Wipe the tip of the bolt off, it's magnetic and the silvery paste is metal shavings.
19) Fill the housing until it comes out the fill hole and replace the plug.
Courtesy MFE from corral.net
Traction-lok rebuild:
A brief traction-lok description: The t-lok, IMHO, is a very simple yet effective method of torque transmission. It uses a combination of frictions and steels; the steels spline to the O.D. of the side gears (the I.D. is splined to accept the axles), and the frictions keyed to the differential case (driven by the ring gear) with tangs. An S-spring is used to provide initial clamping load, then is supplemented by the outward forces created and transmitted by the pinion gears.
If you plan to rebuild the traction-lok, it is advisable that you do it now, for a couple of reasons: 1. Going to a numerically higher gear ratio, the pinion diameter goes down, and the ring gear thickness goes up. What does this really mean? The S-spring "gap" between the side gears is partially blocked (straight line of sight) by the thicker ring gear (you can still get the spring in, it's just a bit tougher). 2. Without the ring gear, you can support the differential case by the flats (across the clutch cavity) on a block of wood, while driving the S-spring in place. Also, there are two approaches to component order: the factory method, and the alternating method. From the factory, t-lok's are packed in this order: shim, friction, steel, steel, friction, steel, steel, friction, side gear. The alternating pack is as described: shim, friction, steel, friction, steel, friction, steel, friction, side gear. There is some debate on the durability of the alternating method, as you have reduced the number of splined components (thereby increasing shear and contact stresses), while increasing the ability to transmit torque. My contention? I've never seen a rearend go out due to t-lok spline failure; it's usually axle related (OK, at some point the axles become stronger than the steel splines; at which point, I don't know! Maybe somebody ought to "run some numbers"...). Both methods work: satisfy your particular needs and plan accordingly (I prefer and suggest the alternating method, FWIW.). The F5AZ-4947-BA kit will allow you to accomplish the "factory" set-up; for the alternating, you can buy a pack of frictions (see number below), or reuse two (one for each side) of your best existing frictions.
The rebuild: Soak the frictions in gear oil for a minimum of fifteen (15) minutes (while you clean the diff case, gears, and shims) prior to assembly in order to avoid dry working and possible component damage. Be forewarned: the clutches will still pop when first driven (I about had a conniption when I first rolled mine out of the garage after gears and t-lok! The thing popped about a dozen times in turns before settling out. I soaked mine about twenty (20) minutes, but the last set I worked on was soaked for about two hours. Result: only one or two mild pops, even with alternating frictions and a new F-150 S-spring!). With the differential case on one bearing, install the .045" thick shim in the bottom cavity. Apply a few drops of gear oil to the other .045" shim and place in the upper cavity (the oil will hold it in place, as long as the drops are towards the case...). Stack the frictions, steels, and side gear (engaging steels) in the lower cavity per your packing choice, then stack the upper units on the side gear, and install as a unit (make sure tangs locate in case). Install one of the pinion gears in place, and, while holding inward with one thumb, install the opposite side pinion gear 180 degrees apart (I prep the pinion gears first by putting a couple drops of gear oil between the gear and it's steel bearing "shell"). Pick up the whole assembly, and install on the end of an upright axle. Rotate the diff case while holding the pinions inward as hard as possible; if you're lucky, the "assembly" will roll right into place. If the shims are too thick, the pinion gears will not clear the case (acting like a built in gauge...). Change one shim to the next thinnest, and try again. If it fails to go together, change the other shim to the next thinnest: repeat until the gears rotate into position. It's fine to have one shim .005" thicker than the other; just don't end up with a .010" disparity. If the pinion gears line up, and the shaft will go through, you have it correct (It took me about three tries the first time.).
S-spring installation: This is actually the most trying part of the whole procedure! The S-spring, by design, has to be compressed to allow installation. The Ford (Helm) manual directs you to tap it into place with a rubber hammer; maybe one that weighed about 1000 pounds and was frozen rock hard! More people have had difficulty with this one seemingly simple task, and I'm no exception. I fought my first one for about an hour, then finally got it by compressing it in a vise, holding it compressed with a couple of pairs of needle-nose Vise-grips, and driving it into place. Shortly thereafter, Larry Turvy from the Corral offered a great tip: use two, 2" capacity worm-type hose clamps. Larry's original suggestion was to use the clamps to compress the spring, but I still use the vise, then install the clamps, leaving a bit of the end exposed to get the thing started. Place the compressed spring into position, and start driving it into place with a hammer. With all luck, the spring will start in a few blows. Continue driving the spring in, until you stop on one of the "worm" portions of the clamp. Cut this clamp out with aviation or tin snips (Dremel or hacksaw may work), and continue driving, removing the other clamp when required. (Note: I found a 6-8" long piece of 1" x 1-1/2" rectangular tube, used as a "punch", to be very helpful in "persuading" the S-spring into position, especially when using the F-150 unit!). Be careful not to drive the spring all the way through and out the back; sight down the pinhole and roughly center the spring. Set the unit aside for the time being.
Congratulations! You've just completed the Traction-lok rebuild!
now when i had the stang up on 4 jack stands.. i turned the car on and threw it into 1 first gear... i looked back and saw only the right wheel spinning....what da F?!?!?! and when i put the parking brake on the LEFT wheel starting spinning... riddle me that!! BATMAN!