Differential getting warm near pinion

I have noticed in the past couple of months that my fuel mpg was dropping off. I also noted a smell, almost like a hint of something burning coming from the rear wheel-well area. I crawled underneath the truck after a 30 mile trip home from work yesterday to find out if there is something obvious.

The only thing I found in feeling the driveline for slop and temperature, is the differential housing, especially near the pinion area seemed pretty warm. It was about a 20F day here yesterday, and I would say it felt like it was around 100F or so. I certainly could hold my bare hand against it, but should it be that hot?

I need to put it up on jackstands, check the fluid level, and maybe pull the rear u-joint connection off to feel more what may be going on there. I did have a badly leaking diff. gasket last fall once after a fluid/gasket change, where the level went down by a quart or so. Hope this didn't do any serious damage. How warm should this be realistically?

I would expect some heat to be generated by a rotating assembly, but if the area feels warmer than some of the other areas that hold bearings this may be a good indicator of a bearing going bad.
Since you stated that the diff did run low on fluid, the front pinion bearing would be the first one to fail (since it is lubercated by the ring gear tossing fluid towards the front pinion bearing)
The repair is simple (in general terms because you my just be able to replace the front pinion bearing and race) but the truth of the matter is to do the job properly, you will have to disassemble the entire guts of the differential.
If you decide to do this, keep the carrier shims in order and do not drop the service washers (spacers) because they are cast iron and will shatter.
The front pinion bearing will fall out when the pinion is knocked out, but the rear bearing is pressed on and it also has shims.
When reinstalling the pinion, you will have to install a new crush sleeve and then tighten the pinion nut until a rotating torque of about 20-25 in/lbs is achieved..if you over tighten the pinion nut, you will have to start over with a new sleeve

Yup, that's kind of what I thought, as far as that bearing being the first to suffer the damage from loss of lube. I would think if it is really going south that it would start to make noise and feel rough too right? Not that I'm wishing for that! :) I remember a friend telling me once about a guy who had a brand new dually Chev, and the rear differential went out. The guy was so PO'd he kept driving it till he got home and it was glowing red by that time! Mine isn't quite that bad yet...

I'm really hoping that it isn't going to fail on me just yet. I have so many other open projects right now. This is the first time I can remember in a long time that I am taking a vacation day to extend the weekend to three full days so I can get my work on the cars and snowmobiles moving along! :D

Thanks for your pointers GMmerlin, I may have to be referring back to some of that if I end up replacing the pinion bearing. I've got a tired 12 bolt posi in the garage for the Firebird I could practice on!