It sounds to me like the right axle shaft is partially engaging in the diff. I ran into something like that once, pulled everything apart including the front diff 'cause I could see some wear at the end of the axle on the splines. I never could figure the cure so I ground 1/8" off the end of the axle and that was the end of the noise.
I sure wish I knew what the route cause of the problem was though....[sm=smiley29.gif]
I just found this info from GM
97-04 T1 vehicles with a grinding noise/vibration from the front axle in 2WD only. The noise is not present in 4WD. Front axle side/pinion gear finish, thrust washer worn, pilot bearing in stub shaft worn, and/or front suspension trim height incorrect