It sounds to me like you bought your truck with a bad pinion bearing. Is your's a single or dual rear? If single, I have always liked the GM Corporate 14-bolt rearends (10 1/2" ring gear) better than Dana 70's. GM used both, with the Dana 70 usually configured for dually use and the 14-bolt for single. The 14-bolt is considered at least the equal or superior to the Dana 70 by most off-road magazine comparisons, too.
The 14-bolt has better pinion support and can be found easily everywhere. It is also easier to work on. I don't know how the wheel-mounting-surface to wms or spring center to spring center distances match up or if you can get around the tone ring provision if you need one, but it might be cheaper and stronger and worth looking into.
Another bonus is the ease and low cost with which a Detroit Locker can be installed in a 14-bolt.
I have a Dana 80 in my 2nd gen '96 and have been considering the same 14-bolt swap. I find the D80 to be very bulky and lacking ground clearance and prone to getting hung up when off-road or even just plowing deep snow. But I mostly miss having the bullet-proof, ultra-reliable traction of a Detroit Locker, which is only made for 4. 10 and higher (numerically) D80's. I have 3. 54's. The factory limited-slip my D80 has is not even comparable to a Detroit Locker. My understanding is that the Dodge Dana 80 uses Dana 70-sized axle shafts anyway. The 14-bolt will handle any load I haul and all the power any Dana 70 will. I don't care if I lose my truck's 2wd anti-lock feature (tone ring), either. Just more junk to go wrong IMO.
I'm into old-iron Chevy's, so maybe the newer model 14-bolts even have tone rings? I just don't know. But I do know you can find a good used one for alot less than the $1000 you said you're looking at to rebuild your D70.
The first gen Dodge and the old Chevy Dana 60 front axles interchange easily, so maybe the rears would, too. A little tape measure work at the junkyard should tell the tale.