OK, so the carrier bearing wasn't the problem!! After driving it today it still has a shudder. After a bunch of research I found that I might have a transfer clutch solenoid problem causing TB. I found some post about the Blinking "power" light and how it will tell you what the problem is. I have noticed the power light blinking at startup but until now I didn't know what it was for. I will check the codes today. How difficult is it to change a solenoid? And if I were to have it done what an I looking at as far as price?

 

old post: http://www.ultimatesubaru.org/forum/showthread.php?t=102596

having the dealer rebuild the transfer clutch, solenoid and clutch plates is about $1000.

 

i paid a local trans shop 285$ to swap out my transfer extention housing with bad solenoid for a known good used rear housing. i supplied the parts. labor was ~70$ - 75$ an hour.

 

you can get the solenoid and 2 solenoid gaskets (2 gaskets fr the valve assembly needed.) online for less than 90$.

 

the repair can be done without pulling the trans.

My code is 32--Vehicle speed sensor 1, so it wasn't the solenoid like I thought. I did however notice that even though I had tightened the bolts holding the carrier bearing it was still loose. I just did a quick fix and added some spacers to the bolts and that seems to have done the trick, no more knocking, but I do have some TB, the car will shudder when I turn hard right or left. It's not a real severe shudder but you do notice it. I am going to change the filter on the tranny to see if that helps. Eventually I'll go ahead and rebuild the torque transfer unit but for now it's ok.