There's a crush sleeve between the two Timken bearings. When the rear end is assembled, the bearing preload is set by tightening the pinion nut and checking the preload with an inch-pound torque wrench. If you've got an eighth-inch of play, I imagine your rear end is making enough noise that you're having a hard time turning the radio up high enough to mask the rear end whine.
The "right" thing to do is to tear the rear end down, replace the bearings, set up the pinion preload, ring gear backlash, etc. But you probably don't drive this vehicle enough to justify a $500+ rebuild. You should be able to tighten the pinion nut a bit and get by. It takes very little movement on the nut to take the slop out of the pinion bearings. Tighten a 1/16 of a turn at a time and check to see if you have a little preload on the bearings. As soon as you feel a little resistance when you try to turn the pinion by hand, stop.
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