Originally Posted by ic-racer

I tore it apart and can answer my own question here. This may help someone else out also.

The reason the screw loosens is that the thrust bearing freezes up. The cure was to flush the thrust bearing very well and re-lubricate it with thrust bearing grease. I used some green thrust bearing grease I had left over from my 1/8 On-road days. Of note, in the instructions it indicates to use thrust bearing grease but it is not included in the diff kit.

If the thrust bearing is lubricated with the wrong substance it does not spin freely and the diff action is not smooth. I initially thought it was the diff balls and plates causing the stiffness, but it wasn't; it was the thrust bearing not spinning freely when the screw is tightened tight enough to keep the diff from slipping.

I'm also going to make sure I put that little pink foam piece in the cup. That will help keep debris out of the bearing. One little piece of grit in that bearing and it will freeze up and cause the screw to loosen.