Sounds like a broken clutch.
Diff doesn't go out without a bang and a cracked trans case with fluid everywhere.
Chances are the disk is broken at the hub or the friction material is gone and it is spun out.
Figure $600-$1000 unless you do it yourself.
Former owner of '99 CSVT - Silver #222/2760
356/334 wHP/TQ at 10psi on pump gas!
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'05 Volvo S40 Turbo 5 AWD with 6spd, Passion Red
'06 Mazda5 Touring, 5spd,MTX, Black