Thanks All! I'm delayed responding back. Some great tips posted. Confirmed the rear diff at the time by putting it on the lift, standing underneath while each wheel was manually rotated. The grind is 100% coming from the rear diff. I was standing there with the former LR Master Tech so I believe its diagnosed correctly.

The consensus is to do the ARB and good point... may as well just run the lines, compressor, etc as those are nominal in cost in comparison to the locker itself. Not sure I can mount the locker switch on the center consul (which is my preference) as its the cooler box unless the interior sleeve is removable, I'll have to check.