I have the front set up as option 1 and rear as option 2. I took on water in my rear diff and the consequence was buggered wheel bearings and carrier bearings due to the lack of separation. Thus as a heads up, if you go option 2 be mindful that contaminated oil can and will migrate throughout and you might end up with buggered bearings end to end. Regular oil changes and a check after water crossings is the form of early detection and prevention.
For the rear oiled bearings help prevent spine wear on the drive shafts.
MLD


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