I agree with Wildgoody, that U-join looks like it is moving a bit.  When was it last replaced?

An alternative to running the spacers might be to pick up an extended slip yoke.  Low Range has 1 and 2" yokes available now for pretty cheap:

http://www.lowrangeoffroad.com/samdrivelines_spacers.htm

i've never replaced the u-joints, so there is a good chance that they are still original.

any suggestions on where to pick up a couple?

also depending on price of those, plus a new slip yoke, should I maybe just buy a whole new drive shaft?
maybe a CV style one?

thanks again for the input.

I have always heard buy the japan ones and if it has a grease fitting on the side of the u-joint no good

Autozone u-joints have served me well, and at like $15 each it's not
a big deal, the grease zerk on the one cap lets you add grease, one
thing the stock U-joints don't let you do

Wild

I just had a problem once before and Brent at TT told me that the best ones was the japan ones that is the ones I have start ed using and had know problem sense then  He said the good   grease fitting you shouldn't have to grease

i bought a pair of new u-joints (duralast from auto-zone, any good?)
also ordering the extended slip yoke. guess we'll go one piece at a time, and hopefully get it worked out.
i'll report back by end of the week once the yoke comes in.

thanks again to everyone for the input.

Brent at TrailTough sells the good Japanese U-joints for just $20 each. Considering the stories I've read from folks using auto-store U-joints, I cannot see buying anywhere else. I've just replaced all six of mine with TT parts. The intermediate shaft was the trickiest, cause it didn't' look like it was a problem until removed. Only then did the one really stiff U-joint become appparent. All smooth now.