I agree with what was posted above...check the diff for a loose pinion bearing/worn bearing condition...then take a good hard look at the spider gears as well. Either will require removal of the diff assembly to properly examine and confirm the cause of the chipped gear/clean debri..if you find nothing wrong just smooth the chipped area as was suggested, and go about life.
as a note... I know a few places still have the 4.88's in stock for the older Dana 70's as I was just recently talking to a gent that ordered a set for a old Dodge...but I have no idea who he bought them from. around 1974 or older Dodge trucks with a rear 70 will have the correct offset R & P for your axle and they were commonly built with 4.88 gears also, if a used set is in order....front 4.88's for the Dana 60 are a little harder to find..but mid 60's Ford 3/4 ton 4x4's used 4.88's and a rear R & P from one of these would fit your front diff nicely... and if you get lucky you may fine one with a power-lok limmited slip as well..
NoRM
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