[Short 3/4]

I thought the same thing about axel to tube clearance being close at the inboard end of the knuckle. Went out and looked at several axels in my spares pile and while they are nice and smooth at the pumpkin end where the seal rides, on the other end the casting is very rough, so no way oil would not migrate out of the knuckle. Keep in mind that most of us now use Cornhead grease or other thick lube in the knuckles, but according to the factory book they take 90W, just like the diff gears. If everything in the front end used the same lubricant there would be no need for the seal outboard of the differential. Look at how the HO rears are lubed. The same 90W lubes the diff and then runs down the tube and also lubricates the outer wheel bearings. Seams like they would have just done the same thing on the front end.
The more I think about this the more confused I get.