Hiya David,
Sorry Clancy, I was in the bathroom.................
David, this does not sound too good.
However, before you think seriously about dropping the transmission, I'd urge you to examine your CV joints. Pull the half-shafts and take your CVs off. Take a good look at them. You don't want to see excessive wear or galling on the cage or the ball bearings. Although this can be THE messiest job in servicing a VW it is not terribly difficult. The Bentley (even better in this case is Muir's Idiot Book) can walk you right through it. However, be VERY careful in removing the Allen head bolts which hold the half-shaft/CV assembly in place. Clean the heads scrupulously and be sure your wrench is a perfect fit.
Suppose the CVs are in great shape - what then? Then it's probably time to pull the transmission out. The most likely cause of the noise is the final drive. Adjusting it is pretty close to rocket science, so this is a job best left to professionals, if you can find one.
But, in all honsety David, it's pretty difficult to diagnose "inside the case" transmission (especially an AutoStick) related problems via e-mail. Were I you, I'd examine the CVs as a first step and if that pans out, I'd find a good VW transmission tech and let him take it from that point.
Mike
1970 AS Bug
Mike
1970 AS Bug
1970 Bus - The Ruptured Duck