Oil sharing between D18 and SM420

My D18 ate the intermediate shaft bearings so I had to remove it for repair. When I took it off I found that the spud shaft from my SM420 was really rusted up. I did the Advanced Adapters conversion two years ago. I haven't been fording any creeks or anything like that. I have a sealed bearing on the spud shaft where it enters the D18. I read in a post in the CJ-5 & 6 area of this site yesterday that the D18 and regular Jeep trannys share their oil. So, #1 why would the spud shaft be so rusted? It's very arrid here in Colo., #2 will the D18 and the SM420 share oil too? I really don't see how it could pass through the adapter. #3 Should I have a sealed bearing between the two?

 

The transfer case oil was a mess as far as metal particles go. Most all of the needle bearings escaped from the cages and I lost a tooth off of the drive gear. I'm not sure if the needle bearings died and took out the tooth or the tooth jumped off and got into the intermediate shaft via the two oil holes and ground up the needle bearings. It ate up the side washers on eilther end of the intermediate gear and ground 1/4" deep groves in the sides of the case where those washers locate into. There was no sign of water and the spud shaft was badly rusted, way beyond surface rust. This case has a 1 1/8" intermediate shaft.

 

Most likely condensation caused by ambient heating and cooling cycles. I've actually watched moisture form on tools when a sudden change in temperature and humidity occurred. Can happen anywhere, not just in wet climates. If the vehicle isn't driven regularly to get everything warmed up and dissipate the moisture then rust can and will form on parts internally, even when full of oil. Usually forms on those parts exposed to air, i.e. not submerged in oil. Seen condensation form bad enough to contaminate the oil, even in dry climates.