[bigmike]

I'm not sure of the "correct" way to test the locker, but I had no differential action; just both wheel locked in sync. ( I replaced it with a Detroit helical gear Locker). When I was repairing the bad u-joint, I took off the rear wheels, and could move the spindle 3"fore and aft,, at the ouboard point. My shell valley did not have adjustable trailing arms, just machined aluminum bars....not good. The rear axle needs to be correctly aligned...there are to many variables in the manufacturing process (welded brackets, drilled holes, etc).
With the adjustable arms, the lower (longer) arms square the axle up to the chassis (not necessaarily the body), and the angled upper (short) arms adjust the angle of the rear axle pinion relative to the driveshaft.
I would, if I were you, disassemble the entire rear suspension, and double check everything. You should especially check the alignment of things, and, if you don't have adjustable arms, get some (about $200.00). It appears to me that your springs are not correct...they appear to be coil bound. I can provide pixs of my new setup if you would like.
BigMike