Probably a stupid question, I've got an '89 Silverado, 4 speed 4x4. It's got the HD cast iron tranny, and a NP 241C TC. I recently did a clutch replacement on it. That was a cluster, but another story, and after putting it all back together, using a paper seal between the transfercase adapter and the transfer case, it of course developed a leak. So I pulled the TC off and cleaned up all the surfaces, and applied a proper RTV seal. Leaked again.
Dumb question is, when I removed it after the paper seal failed, there was a fair amount of gear oil in there, that was just sitting in the TC adapter, like 3/4 a qrt maybe. That shouldn't be the case, right? So probably a bad output shaft seal from the tranny to the adapter or what?

Someone on another forum said that's normal for gear oil to leak past the bearing, since there is no "seal" and just redo the seal again, but after 20ish years of not opening it up, when I cracked it for the clutch job, about a cup and ahalf leaked out, after the clutch job, an about 50 miles of driving and leaking into a drip pan, this time when I cracked it almost a quart came out. If the seal around the TC adapter and the TC was tight and didn't leak eventually the entire TC adapter would fill, and the output shaft would be submerged, and of course without proper topping off, the actual transmission would be real low.

Am I missing something ?

 

It’s normal for trans fluid to collect in the TC adapter (would be just an extension housing if it was 2WD).

If you look at the shaft bearing in your pic, you’ll see there’s holes surrounding the perimeter of the inner race. Those are there to allow oil to flow and keep the shaft bearing lubricated.

What’s more likely the cause of the different fluid levels is the trans fluid was low when you pulled it for the clutch job.