It rains a lot here, as in frequently, but I wouldn't call it heavy.

Sounds like you have a water ingress issue.

Also, diff fluid is not cheap but $350 is ridiculous.

Finally, the dealer (in Lynnwood) is more reasonable than you think. They actually have a labor rate they apply to older Rovers that is competitive with the Indy shops. Give them a call. I don't go anywhere else; they are awesome. I've had my LR3 for 15 years this June...