Replacing pinion seal

[oldguy64malibu]

Am in the process of replacing a leaking pinion seal on my 64 Malibu. With the car jacked up and the wheels off the ground and trans in neutral I can rotate the drive shaft maybe a 1/4 inch either way without the tires rotating. I disconnected the driveshaft from the differential and then the input flange nut (much fun). After using a puller I was able to remove the flange and found I could move the pinion shaft side to side approximately 1/8 inch. This doesn't seem right but other than a slight oil leak from the seal the differential doesn't make any strange noises. Any suggestions on what to do next as far as the play goes ? Please don't tell me to install a Ford 9" rearend in it. Thank you again. As usual, everybody is a big help.
Harvey