Hi all!

I have just recently aquired my 87 240 wagon, and have replaced the brakes (from the rotors up), the tires and the transmission. I still hear a grinding when I slow down or accelerate (from about zero to 10mph), and I am now hearing a clunk from the rear (I think) every time I slow or accelerate. This has progressed from an occasional clunk when I turned a sharp right (like at a four way stop).

When I first got my wagon two months ago, I took it to an indie, who suggested that I replace the rear wheel bearings and the transmission. Since he doesn't work on transmissions, I took it to a shadetree mechanic who put one in. He said my "entire rear end should be replaced" and that "it's not uncommon on wagons to have the rear end go out". He also quoted me a price of $600 to fix it. (The indie wants $500 for the bushings).

My questions are:
1. What in the rear end could go out besides the bushings?
2. Is there a way to check either of their claims?
3. Is this a reasonable price? (I'm a student, and already into the car $2000 over the purchase price~)
4. I live in Southern California. If you know a reputable shop or mechanic, I'd be interested...

Thanks for any and all help you can offer!