Where did it state it was a dana 35? Anyway, Couple things simple things you can check:
Drive shaft ujoints
Rear emergancy brake: could be sticking
Watch the rear drive shaft as it turns, going slow, does there appear to be any binding or skipping when it turns. If so it could be something inside the diff. But as stated, give us some more info and we can try to help.
similarly to what rawkon said...i had issues with clicking/creaking sounds from the rear axle in my '00 sport. it had the d35 w/tracloc and had no mods done except 31" tires. i would get a popping sound when transitioning from going in reverse to starting out in first. if i backed up, then backed up again - nothing. it was only when changing direction...and only that first time i started out. the dealer tried everything (was new still) and in the end deemed the tracloc to be the culprit. since they don't tear into warranty items they just shipped me in a new d35 and swapped it out. problem was gone. just my experience.
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