2003 Rubicon Front End Trouble

I have 2003 Rubicon that I was rebuilding the front end (ball joints, wheel bearings, front diff bearings). I had the honda shop rebuild the front diff. I put it all back together and it was extremely difficult to steer and would pop while turning. I thought the axles were bad so I bought a set of axles. It made it a little easier to steer but it was still hard to steer and popping while turning. Long story short, I narrowed it down to the front diff. I took it back to the honda shop and they told me that when they took it apart the first time for the rebuild it didn’t have any oil in it and it had water in it and that it was really rusted on the inside. They are telling me that the cam follower set/gear had so much rust on it that it pitted the metal and that is what is causing the popping. That part is $200+.

It seems to me like the limited slip is not working. But the shop is saying that this is the problem.

Any ideas?

Thanks!