He could try rotating the upper shaft manually with the engine off and the transmission in neutral. If the coupling is coming loose, there is probably going to be some free play. If the coupling is OK, it should be pretty solid.
If the trouble is there, I wouldn't expect the noise to be much louder with the cover off. So I guess it is on open question whether the louder he is hearing is enough louder to prove it is from inside the transmission.
So far, we haven't talked about whether there could be a noise source related to the PTO. I'm assuming this whole situation is going on with the PTO turned off, which eliminates most things PTO related.
I'm inclined to think a chip is imbedded in the oil slinger gear.
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Today's Featured Article - Oil Bath Air Filters - by Chris Pratt. Some of us grew up thinking that an air filter was a paper thing that allowed air to pass while trapping dirt particles of a particles of a certain size. What a surprise to open up your first old tractor's air filter case and find a can that appears to be filled with the scrap metal swept from around a machine shop metal lathe. To top that off, you have a cup with oil in it ("why would you want to lubricate your carburetor?"). On closer examination (and some reading in a AC D-14 service manual), I found out that this is a pretty ingenious method of cleaning the air in the tractor's intake tract.
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