Sounds like a pinion bearing to me.
I have had them go out several times on my business trucks/vans, and have yet to have anything else damaged.
Hopefully you'll have the same thing.
The price sounds reasonable.
If you have been wanting a ratio change, now is the time.
It's not terribly hard to swap a pinion bearing. You would just have to put everything back exactly as it was.
If you are not changing the gear it's pretty straight forward.
Another option I have used when the pinion bearing goes out and I don't have time to mess with it: Get a used rear, and put the other aside for a high quality buildup. Stang 8.8" rears with the limited slip still inside only run $100-200 around here, and way cheaper if you luck up on one at the u-pull.