No lowering the diff all the way. Did you inspect the splines before hand? Are you sure you got the right type of axle?

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http://superturbodiesel.com/images/sig.04.10.jpg
1995 E420 Schwarz
1995 E300 Weiss
#1987 300D Sturmmachine
#1991 300D Nearly Perfect
#1994 E320 Cabriolet
#1995 E320 Touring
#1985 300D Sedan
OBK #42

Try swapping sides. If the left side goes in the right side and vise versa, then your golden. If not, then you you've narrowed down the possible issues. Also, check the spacer thickness for each spacer.

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1983 123.133 California
- GreaseCar Veg System

It was a spacer problem. I had switched axels from one side to the other. Some how Ihad double sapcer on the right.

The spacers will 'hide' sticking to the diff bearing race sometimes when the axle comes out.

I am pretty sure that is was the issue they were hiding.