I had a case break right behind the
pinion nut.
It appears that a lower gear tooth broke
off and got wedged between the lower gear
and pinion gear......somethings got to move,
evidently, the steel tower is stronger than
the area of the case where the pinion nut is
retained, so it lost the battle

Anybody else see this happen ?

Yes, I have seen it.. one tooth, next one and bingo, out the front it goes. When Merc designed the new XR, they changed the retainer nut for the pinion assembly. It is larger ID. so the case is thinner at that point. If you break a tooth.. that is the most likely place for it to give.. the snout on the case. Sorry to hear your story. It doesnt happen that often that I have seen when things are setup properly and the magnets are watched..

Hope this helps
Dick