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Think my dana35 is on its way out...hope its not the AW4

If you don't hear a terrible grinding noise then it's not your rear axle, unless it's completely blown up it'd be impossible for an axle to do that because of how it works., your transmission is slipping.
 
yep, that sounds like your trans is slipping. of course it could just be low on fluid, might want to check and/or change it and see what happens.
 
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