I have Been driving my project around a little and have found alot of  "slack" or "Play" (Back lash?) in the rear diff.  I need to know if this can be taken up with shims or do they get to the "Point of No Return" when they wear bad enough to make noise or roar. It is not as bad as my old Willys but it does make noise. Any thoughts?

I assume you are gauging the "backlash" by how much you can rotate the driveshaft back and forth, right?  The only way to measure actual backlash is to drop the thirdmember out and use a dial indicator on the ring gear.  The "play" you are seeing/feeling is the slack in the spidergears, as well as the actual ring and pinion backlash......so again, you can't determine actual gear backlash by how much the driveshaft will rotate back and forth.
If the rear end is making noises have you checked the oil level (making sure it is filled properly), and checked for contamination (water)?  Have you tried to move the rear driveshaft up and down, back at the pinion....if it moves up and down, that means your pinion bearings are loose and the third will likely have to be dropped out to fix the problem (unless it happens to just that the pinion nut has came loose (which it shouldn't, since the nut is supposed to be staked) and you could tighten it back up for a temporary fix).

I pull up the "E" brake while on jack stands and can go under and  twist the drive shaft about 1/8 turn (yes 1/8 turn) it does mot move up , down , left or right or in or out.Trans is in neutral. Can you shim out THAT much backlash? I know I need a dial indicator and etc. but if it is already this lose should I even take the time to try?

I pull up the "E" brake while on jack stands and can go under and  twist the drive shaft about 1/8 turn (yes 1/8 turn) it does mot move up , down , left or right or in or out.Trans is in neutral. Can you shim out THAT much backlash? I know I need a dial indicator and etc. but if it is already this lose should I even take the time to try?

Again, that is not backlash.  You are misinterpreting what "gear backlash" is.  You do not know how much backlash you have until you remove the thirdmember from the axle housing and use a dial indicator to check it.  That amount of driveshaft movement sounds normal to me (go do the same thing to any one of your other vehicles and you will likely have about the same amount of movement).  And since the pinion is not loose, I don't see that you have a problem.

Thanks for the info. Today before I came to work (here now) I ran by a local shop that I was told that they specialize in drive lines and "set up" gears and I was told that I have a more serious issue than I thought. It is the rear end not trans. or shaft.  I guess my next step is to pull it and check it. I will keep you posted.

Thanks for the info. Today before I came to work (here now) I ran by a local shop that I was told that they specialize in drive lines and "set up" gears and I was told that I have a more serious issue than I thought. It is the rear end not trans. or shaft.  I guess my next step is to pull it and check it. I will keep you posted.

I can't say whether you have a backlash issue or not, since I am not seeing it first hand.  But from your description of how much the driveshaft rotates, I don't believe you do.  I checked one of my samurais today, and it has almost exactly 1/8th of a turn of rotation in it, and the backlash is fine in it.  If you are hearing growling or other unusual noises coming from the rear, then you could have a bearing issue.

When I went to the shop we went for a ride when he told me to give it the gas for a bit and then let off and let it slow down on its own still in gear ( we did this in each gear but rev.), you could here the "Whine" change pitch in noise. we did this in all 5 gears a few times with the same results. He even had me get up to speed (about 45mph) push in the clutch and hold it in, put the Trans. in neutral and coast, this still had the same results but this time it was a steady noise. I am putting this togeather for my little girl (to me) to drive, so new bearings seals etc. don't really bother me. It just needs to be right for me to let her drive it.