I was checking my ujoint and when I was pushing up and down on the driveshaft I noticed there was some play maybe 1/8" up and down. Is this normal or is the trans. Toast?
You should see a little play there but not nearly 1/8". I have never measured one but I wouldn't think it should be more than 1/16".. Sounds like the extension housing bushing is trashed and/or the yoke is worn. I'd measure it with a dial indicator to make sure cause sometimes wiggling things by hand can be deceiving. Is it leaking very much atf from the rear seal? If not chances are things are fine
BTW: if the bushing and yoke are worn it doesn't mean the trans is toast. They aren't hard to replace
If you can find a bushing puller it's a 15 min job to do the bushing and seal both without having to disassemble anything.
Just remove the driveline, pop the seal out, pull the bushing and put the new stuff in.
Of course you want to make sure the yoke is ok as well.
The biggest problem if it isn't leaking is that the driveline can get a little off center and cause a vibration.