Rear differential leak

I own a 1998 S10 standard tranmission with approx 80,000 miles, 4 cyclinder 2.2 L. I recently had overheating problems and had it in the shop and they repalced thermostat as truck was running up around 220, now runs at 190. I also did tune up and oil change etc as I was going on extended trip.
While driving about an hour into my trip I noticed a drop in RPMs. Turned off radio and noticed a whirring almost grinding sound. Also could smell something hot being burned off. Gauges didn't indicate any changes. Pulled off road and shut her down. Fluids revealed no losses. But, when I looked underneath rear end noticed differential leaking at fairly decent clip. Onward. Called for a tow and when mechanic arrived with tow vehicle he asked me a couple of questions and asked if the truck was seized up. It wasn't. He turned truck on and drove it partially up on to the tow truck bed and took it to his shop and told me I would need a whole new rear end and it was seized up. Said he had just done a buddy's 2000 S10 with same problem.
My question is could he be right without even looking inside? He quoted me a used rear end from a junk yard would run about 400 with a charge of 4-5 hours of labor. I am looking at a repair bill of 650 or more. Please help. I know some about engines but, nothing about rear ends and after last week's bill getting ready for the now postponed trip, I really can't afford this bill.
Thank you for any advice/concerns/issues you might think are relevant to this. :Roll: