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I want to thank all of you for the help diagnosing the problem. My brother the retired engineer (at 53) offered to trade me a good running well maintained MG convertible complete with a hard top. I doubt this will be popular will subaru fanatics but I have to take it. after my brother fixes it he will get bored and give it back to me I bet. He has a couple subs, a couple Mercedes, a vw, and a toyota. You have been great. This will not be my last Subaru. They are the best awd cars by far. I may even have to buy a nice new one. lol

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Thanks again. I think that this fits the standard for my motto. Thiss is when I am at my most dangerous.  I have joked for years that I have all the tools to take my cars apart. I just don'y know how to put them back together. YouTubehas a video i will watch again.   I will post updates as I have any news. 

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I don't usually work on transmissions. I've always been scared. I also have a motto: "If it's so broken that I'm sending it to the junk yard, I can't break it any worse". How would I go about replacing whatever makes that groove? Can it be done with trans in car? Thanks 

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Thank you again Elite Master, The damaged groove makes the most sense to me. I will post any findings and results. If the problem is internal to the trans I suspect I will junk her and find another.

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Yes the stubby shaft is coming out on its own. Normally they need o be pried out gently. It should come out without a fight I think. I may swap stubbies next weekend if further inspection of control arm/bushings/trams mount yield no new information.

Thank You Elite Master

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Thanks for the continued thoughts. I compared the new axle to the one I removed and they were the same in all aspects as far as I could tell placing them side by side.  The old axle dislodged to initiate my repair.The old axle was on there at least 5 years. I, therefore, have dismissed the possibility that the axle is the problem. 

Thank You Master

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Thank you again Texan! I will let you know what I find. That sounds very promising. 

Thank you also EAT, Live, Breath: I knew you didn't have to remove the inner stub. If It had not been dislodged I may not have pulled stub. I don't have a lift so I likely would have pulled it rather than crawling under the car with a hammer and a punch.  It was not a choice. The ring on the end of stub is the only thing tasked with keeping it in trans. It looked fine but when it popped out the second time I decided to replace it. only a $2 part. I should have know $2 was not going to fix it. 

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actually yes, it pulls to the right when accelerating. I'm off to work but will check back this afternoon.  I worked for the best sub mechanic in town. He is actually the highest rated mechanic in the Raleigh/Durham/Chapel Hill area. I dont think the frame is bent. My sister just cant park for S... and has bashed things in parking tots. It has never been in an accident over 20mph. The engine runs so well I hate to give up on her especially when most things I can fix for the cost of parts.

Thank You Texan

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car was my sisters for 180k miles. I have put the last 45k on it. i have not measured the length. it matched up to the one i removed. the one i removed had also dislodged from trans. I am leaving town for the weekend and will properly inspect the trans mounts. no lift on car. its stock from beat up front to back. 97 impreza outback sport w 2.2L and auto trans. I did break 100mph about 400 miles ago. i was being an idiot but she had more to give. have not noticed any slippage or vibration. It came to me for free. It owes me nothing. I love that thing especially in the occasional NC snow. She will go the junk yard if it is the trans. The trans fluid did not smell burnt. visual inspection of male(axle) and female(trans) show no signs of any problem. Thanks for your thoughts. If this provides any other ideas as to the cause I would love to hear them. It is my "winter" car so I have months before I would be driving it more than a couple times a month. That is unless my Toyota minivan breaks down. 

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it comes out as soon as it is put in gear if that helps. 

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engine mounts are solid. its hard to see the trans mount. from what i can see it is good on both sides. 97 impreza outback 2.2L w autu trans. sorry i left that info out

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the passenger side cv axle has popped out ou the trans. ok, replace the axle. right? Nope. new axle popped out as soon as i put it in gear. I decided to replace the circlip which holds it in. finished job again and pow. out it came again. I am not a mechanic. I do however kinda know what I am doing. or so I thought. i replaced the driverside last year and all is well. I tried to check and recheck to make sure it was seated in the groove. It did seat but would still pull out with a good tug. Any ideas subaru folks? Ever even heard of this happening? Thanks