andy-
Below is a drawing I put together to try and better explain how the rear end works. As far as the starter goes, you remove the quick change cover and the lower gear, which mounts to the mid shaft inside the rear end that couples to the driveshaft at the front of the rear end housing. It's a straight shot from the lower gear to the engine. The starter is a hi-torque Chevy starter bolted to a case that fits neatly in place of the quick change cover and has a splined connector that slides over the mid shaft where the smaller gear had been. Since it has no external teeth, it doesn't interfere with the larger top gear, which normally turns the pinion/ring gear/axle. The starter then spins the mid shaft, which is coupled to the driveshaft, which spins the engine, etc., etc.
Take care,
-Chris