At a quick glance in the dark, I assume this is an axle seal gone bad, right? Or am I wrong?

(Sorry for the bad photo quality, it's hard taking pictures under the Discovery with a fullsize Nikon while trying to stay off the ground to avoid getting your uniform dirty)

 

Yeah. It appears so. Not that bad of a job. I think the seal is the 16 bucks. The best part is, if you dont have access to a lift, you can do the work while sitting

 

The crack does not look very good either, and it does look to be the seal to me too.

 

Crack?

 

it looks like a crack but after looking closer its just because its wet i guess. Sorry

 

Bad CV boot, look at the small end, the end nearest the diff, its wet.
If it were the axle seal it would be wet on the other end.
The inside of your rim would be wet to if it were the axle seal.