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The only bad thing I saw in the picture looked like a planetary gear was overheated. Other than that everything in the pictures looks kosher. There were no pictures of the front diff they are claiming to be bad. Mind me asking where you found a new one?? The grooves you saw were on the transfer inner drum which is typical for these transmissions so that is nothing to worry about. I just hope they are not giving you the hose but 1900 for the rebuild is a very reasonable price so I cannot say they are. Just make sure there is no underwriting or fine print on their warranty policy and it looks like you will be in good standings. good luck
Tom
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