That's an interesting pinion. Looks like it has the cvd built into it instead of the cvd or drive cup sliding over the end of the pinion. I'm goinna have to get on axial and check it out.

This may be you just mistaking terms, but when I mentioned the pinion moving in and out, that would be in and out of the diff housing, not the diff cup. The diff cup is the part that holds the spider gears and attaches to the ring gear. When we talk about mesh we're referring to the mesh between the ring gear and the pinion. First you say it's not notchy when turning the pinion, then it is. It's usually better to rotate the pinion itself than the driveshaft when checking for smoothness in a diff. Heres how to make sure the mesh is correct. With the diff fully assembled in the vehicle, put two of your fingers of one hand on the diff outputs to hold them still. Now turn the pinion back and forth checking to see if there's any play. You want as little as possible without the diff becoming notchy. If the only way to adjust the mesh is by shimming the pinion then it's likely you'll have to compromise a little and have some play but a smooth rotating diff. Play = add more shims. Notchy = pinion is set too deep, remove shims.