[mrennie]

If I understand correctly, the clunking is when pulling/pushing on the end of the axle? So in and out make the noise rather than up and down?

An up/down motion making a clunk could be axle bearings and shaft wear.

An in/out motion making a clunk is likely excessive end play, with the play being between the end of the axle and the cross shaft (axle pushed in) versus the C-clip and the recess in the side gear (axle pulled out).

On an Eaton clutch posi, shims are inserted between the case and clutch stack behind the side gears, to adjust clutch action. When the clutch plates wear, or if there are insufficient shims, the side gears sit further in the case (further from the cross shaft), which results in more end play which could cause a clunking noise when the car is turning or rocking side to side.