Thanks for the helpful comments.
After watching a few YouTube videos, I better understand why this pinion is far too gone. I'm thinking the people who rebuilt it the last time didn't do the proper heel/toe adjustment. It would be noisy even if didn't slip. I'll be buying a new set. For future reference and others who might need an education on rear diff anatomy, here's a video I found super helpful:
GM 10-bolt axle rebuild complete!
I'm planning on keeping most of the truck as close to original as possible. It's got the "4 on the floor" transmission with granny gear and this open face D44 (no limited slip). With this in mind, I've read that going to high in diff ratio can really reduce the torque. To keep a happy balance between highway and rear wheel torque, I'm wondering if it would be best to stay at 3.54. Does anyone have experience with this?