Ouch dam! Thats some cash right there. Ive pulled mine out about 3 times now and can almost do it with my eyes closed. Get a shop manual on how to do it and read through it. I would at least try it and if it dosent work out then you can take it to them. I say go for it.
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It sounds like your dealer is just lazey and dosent want to pull your diff apart to see what the prob really is. For all you know the parts that you need could only cost 100bux but if they replace the whole diff for 600 bux, well you do the math. As for the water, yes it will damage it but probably only if you ride for a while with it full. It dosent help the sensiors either.
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