Yep, your pinion bearings are shot then. Once those are gone, your gears' mesh/alignment wanders around and the gears start making crunchy noises, usually first noticed when hard on the brakes or in reverse. You can try throwing new bearings on the pinion, but if you've been hearing those noises, you'll likely need to replace your gears to.
The lack of pinion support is what I would consider the biggest weak link on the Rey's. Luckily, there are several aftermarket options available that will solve that problem by using both larger bearings and a much more rigid aluminum housing. SSD, Hot Racing, Metal Concepts, (and I think a couple others) make replacement 3rd members, Vanquish and RC4WD make complete replacement axle housings. Prices range from ~$25-$150, but they're all good fixes (can't speak for the RC4WD axle as I haven't heard of anyone running one.)
SSD and Exotek both make aluminum front diff housings for about $50, but the SSD one uses larger bearings (13mm inner, 11mm outer, vs Exoteks 11mm inner and stock sized 10mm outer.) If you've ever seen the size of the balls in a 5x10x4 ball bearing (stock inner and outer pinion bearings on front and rear diffs on the Rey) they're about as big as dust, so even the jump to a 5x11x4 (like Metal Concepts uses) about doubles the strength/size of the balls inside.
I'd consider those parts money well spent for the sake of reliability.
