I read a lot about the Dana 35 axle and how it's prone to breakage, but I've also read a ton of stories about how people are driving them with lockers and 35" tires without issue.
Here's the story of how I killed mine - while driving down the street (yes - the street) at about 15 MPH. Not exactly the hardcore story I'd like to have in my quiver, but it is what it is.
It all goes back to my lift. Every Jeep is different, and mine apparently rolled off the production line at Chrysler destined for a life of street use without a lift kit. Why do I say this? Because my driveline vibes with the little 2" lift installed were HORRIBLE.
In successive attempts to repair the issue, I installed a track-bar relocation kit from OME, an AA SYE kit, a new Tom Woods CV rear driveshaft, Nth Degree Mobility adjustable rear upper control arms and a 1" engine mount lift (with a 1" body lift).
It all improved, but there were still vibes on take-off. I even paid my dealership to confirm my pinion angles, and look things over (figuring the street in front of my house might not be the best place to set my pinion angle accurately). They tweaked it a little bit, but it was still bad.
Now it's important to note that my vibes went away after take-off. At speed in any gear, it drove smooth.
So here's the little gem I learned the hard way while I was screwing around with all of this: it seems that bad driveline vibes can gradually cause your rear pinion nut to loosen. Once it gets a little loose, it loosens a LOT really quickly, with very little warning.
Had my stereo not been on so loud, I probably would have heard the noise a little earlier -- though it was no more than 5 minutes from start to finish....
I took a short drive and about 5 minutes in, while driving down the street, there was a horrible noise (think of metal in a blender) and my rear axle seized up - totally. Tires locked and skidding.
I jumped out and saw gear oil leaking from my pinion seal. Not good.
I was able to throw it in reverse and back up a couple of feet before it locked up again. That got me off the road at least.
A few hours and a tow truck later, I dropped my car off at the dealership. I had to be at work the next day and I wasn't in a position to take time off and tear it apart.
The next day, I spoke with the dealership, they told me that the pinion-nut had loosened, which allowed the pinion to "suck in" to the housing and its teeth made contact with the outside housing of the ARB locker. Not only did this chew up the side of the locker and shoot debris into my bearings and seals, but it stressed the pinion, which snapped and threw a tooth - which was then sucked back around and driven between the pinion and ring gears.
Suffice it to say that my backlash wasn't large enough for the tooth to actually make it through - so it seized.
I'd been planning to build a new axle (actually already had a brand-new Rubicon Dana 44 housing on order already), so this advanced my time line.
I asked the dealership to flush the housing really well, check the bearings, pull the rear driveshaft and the ring gear and put the rest back together.
I flipped it in 4-wheel drive high-range, and drove home - possibly the only front-wheel drive jeep around that day. I then proceeded to drive it in front-wheel drive for my daily commute while I built my new axle. It's worth noting that a front wheel drive jeep gets stuck in all kinds of places -- like my driveway.