It could be the pinion bearing going bad. I just had mine let go today. The pinion had up and down movement. You don't want to tighten the nut as that will change the pre load. May want to take the cover off. I did yesterday and after what I saw I am glad I wasn't on the freeway when she blew. I shouldn't have even driven it. Oh well.
97 TJ Sport, 4.0, AX-15, 4" lift, Rancho 5000's, Pro Comp ES2000 Stabilizer, JKS discos, T-Case drop, Rampage top, Sony/Sirius deck, 33" Firestone Destination MT's