Toyota Repair: 92 Corolla Trans and Drivetrain, metal shavings, drive axles

Question
Ted,
While driving  {55 mph) on the expressway the car gave a heavy shutter along with a metal to metal grind, then started loosing its momentum.
and finally would not accelerate anymore. The car starts and idles fine but does not move. The car will roll in park and when it is put into either drive  or reverse a winding rattling metal to metal  grinding noise appears, if you shift into neutral the noise goes away.

The first answer from the "tranny shop " is the tranny needs  to be dropped and overhauled expect the bill to be around $1500.

Im not 100% convinced the the transmission is totally shot, but more in the line of a transmission to differential problem. any clues?

Although my  92 Corolla has 205k miles it has been a dependable workhorse. the maintenance of the car been kept up to date  and the tranny was tuned up
about 15k miles ago

Thanks
Paul

Answer
It does sound like a major problem with the differential, the problem is that when the differential decides to fail, metal particles can enter the transmission, they both share the same oil supply so metal shavings can transfer into the transmission and contaminate it, once this happens it is time to replace the transmission.
Most of the time this happens the transmission case is damaged and not useable for rebuilding or overhaul.
There is one more thing to check before you do anything, make sure that the problem is not with one of the front drive axles.