Im wondering, if both you guys have had the belt running up against the side of one of the gears somewhere? or tensioner? More than likely the layshaft/slipper gear I think, but if its rubbers away the side then chewed the belt, and side of gear breaks away (like in Stu's picture), belt moves aside and as you rev it a 5zillion rpm, it goes into meltdown.
When you two rebuild the transmission, just check to see if the belt runs up the side of the gear. The way to stop it, is can moves shims around layshaft to adjust where the gear is, for small adjustments. Can also shim out the tensioner pulley, or flip the diff gear over (as it is marginally off centre), but don't just flip the diff as the bolt will go the wrong way - take diff apart and flip just the gear.
Erm. I have never experienced this, so don't shoot me if im wrong with the above.
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