Well, we found the problem(s). The input shaft and cluster gear are toast. So, now we are faced with 2 options...
We could either rebuild the tranny for a total cost of $490 plus shipping not counting the clutch and pressure plate.
or
My brother is in good with the local Ford parts department guy so he can get a rebuilt tranny for around $475 which comes with a year warranty.
I'll think the rebuilt one is the way to go
Here is a not so good pic of the problem areas:
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