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My M936 has a little hatch cut in the bed above the transfer case, I guess it is for lifting the transfer case from the top then letting it down to the floor. On my M936 it is under the spare tire.
I have not seen your problem, but to answer your questions. I would say it is on its way out for sure.
#1 Yes there is bearings that maybe going bad.
#2 Yes the transfer cases are the same, you would have to move the PTO from the old one to the new transfer case.
Castle Bravo here in AZ has...
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