Sorry guys, I didn't do a good job of explaining this.
With the rear end completely out of the car and driveline sticking out of the transmission (which is in gear), I can rotate the driveline probably ~5 or so degrees back and forth before it stops. This ~5 degrees of play is what is causing the clunk. It is very noticeable when driving, as anytime you let off or step on the gas, it "clunks" to re-engage.
My question is if anyone else has experienced this or if my transmission is messed up.