2000 Cherokee rear axle swap HElP!!!!

So, I don't know if this belongs in the OEM forum or modified, but I need a little help. I just bought a 2000 Cherokee, 90,000 miles, 2 door 5 speed, 4.0 L. I was wriving down the road last week and heard what I thought was a wheel bearing. So I pulled the good old dana 35 apart and checked the wheel bearings. They were good. So I checked the carrier bearings. They appeared to be good. I started it up and put it in first and let it idle, (with the axle back together). And the grinding noise is definately coming from the rear axle, but I can't tell where. I didn't check the pinion bearings, so I assume that it is coming from there. The u-joints are tight and the tranny is fine.

Two questions. Has anyone else had this problem? And I picked up a Chrysler 8.25 with the same gear ratio (3.07) and a limited slip from a buddy and was thinking about throwing that in there. Has anyone out there done that to a newer Cherokee? The only thing that worries me is the ABS. I know that you can pull the fuse and run without it, but does that fuse contorl anything else?

Any help would be great. Thanks in advance.

To answer a couple of questions....i did run a locker in my 2000, everything is the same as running a locker in an older vehicle. I ran my locker while having abs, no problems again.
The last thing i can help you with is the ABS...pull the two fuses and abs relay and your abs will no longer work, and have no side effects. When doing my axle swap to a non abs axle i decided to unhook the abs sensor lines from the control module under the rear seat on the drivers side and pull them through their rubber grommets instead of cut them like most recommend. Its clean, no dangly wires and the abs can be out of the picture! Good luck

(I took my ABS d35 out and put an 8.25 in and it was super easy)