You wouldn't think that it needs to come out just looking at it if you didn't know what it was to remove it. It does look like it belongs there.
JC, FYI The postals did get trac locs stock, but this was in my replacement rear end with a normal carrier.
I got my current rear axle with leaks at both ends of the axles.
I pulled the diff (non-trac loc) to pull the gears off (I was going to put thme in my original axle and reset the gears) and saw that the thrust block was still in it. I pulled it out and one end of it was ground down with an exact impression of the end of the axleshaft on one side where it was hitting BADLY. I decided to take a chance and reassembled it without the block and the leaks were gone (and still are).
I don't know if it has to come out for all of them but it certainly needed to with the ones I have.
From one site:
A word about axle shaft thrust blocks: A few differentials, such as the Jeep AMC and the older 19-tooth Spicer 44 axle, use a thrust block between the inside ends of the axle shafts as a part of the end play adjustment. When installing a LockRight, this block is reused along with the original axles so that the original end play adjustment does not change. However, if the original axles are changed to different original-type axles, the block will continue to be used but the end play must be re-adjusted (see the shop manual for the procedure). If the axle is changed to another type that does not need end-play adjustment, such as a one-piece design, the thrust block may be omitted. In the Land Cruiser, the block is never used.)
Here's a good page with a drawing of the block, check it out.
http://www.trailhed.com/axlepage.html