The following is for most Dana rears, there are other methods for different style rears but after all, this is the
forum. This is by far a guide to set up a rear, just the way I've done them. By all means, setting up rears can be attained by an average mech with average tools but if set up wrong, will lead to a short "gearlife". If you have a shadow of a doubt, I reccomend not trying to tackle it. OK, enough of the disclaimer crap...........
Thru trial and error of setting up many rears, I have found out that the "mathematical method" for setting pinion depth(Hard part) to work best .(You gearheads will know what I mean!) That is unless you have a pinion depth gauge.
As for backlash(easy part), I usually set the test bearings on "dry" and using feeler gauges outside the races to establish .000" backlash with NO carrier bearing preload. Once you have your "shimpacks" established, then add the spec. C.B. preload to the toothside bearing(one opposite to the ringgear). This USUALLY brings your backlash to within spec.
In other words, it "pushes" your carrier away from the pinion increasing backlash.
.............or you can establish specified backlash and add half the preload to both sides.
Again, read all you can on the procedure before you attempt it. I've had Dudes call me to come and look at a pattern when they just dropped a set of gears on a carrier and said, "What do you think?" Well, if you follow proper procedures, 9 times out of 10 the pattern will be correct the FIRST time.
Ron