Loud noise while driving at low speeds

This is an automatic, 4.3L, v6 with part-time 4W drive, s10 blazer. When I drive the car it makes very loud noises (like metal scraping) at low speeds and the noise becomes less audible at high speeds. It disappears when I engage into 4 wheel drive. The noise appears to be coming from the front-right side of the vehicle. I took it to a mechanic and he said it is a washer in the front axle tube that is making this noise. He said that he would have to replace sleeve, gear, washer, and seal. I was wondering if you have come across something like this before and if the mechanic's diagnosis makes much sense.