SuperAsquirrel: This economical fix can work, but not always. I have 3 tractors here, all leak if transmission is overfull. Something I do once each year is jack each rear wheel. As wheel lifts off floor watch for looseness of axle in relation to final drive housing. Once I have wheel off floor, I turn it listening for anything unusual.
Save Pete's photos and direction, you may need them. He has very good direction there. It's a lot of work to remove those final drives. If the leaking stops and final drive runs quiet, no loosness of axle, I wouldn't touch it. Looseness on the axle in the final drive is your biggest danger. I have seen them get loose enough the bull gear and pinion ride up on each other enough to slip over a tooth, and in doing so break the final drive casting. I've only seen that once, neighbor called me to come and look, surprisingly this tractor had not leaked.
What was the condition of the oil you removed? Did it look milky? Often times these old Farmalls get transmission overfull as a result of water. Water can occur two ways; condensation and rain. These gear shift levers are not very water proof. Due to position rain deflection from higher points on tractor can run down the shift lever and into the transmission. If I leave my SA and 140 out in the rain, I always place a bucket over the gear shift lever. I have a 6"x6" section of inner tube with hole in middle down over shift lever, to the spring of my 130. I have it sealed with epoxy. Looks ugly, but it always works.
Lots of long hour days will evaporate water from transmissions. We never had these problems when these tractors were clocking 400-1,000 hours per year. The tractor is much like the owners, needs exercise.
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