I think you have 2 unrelated problems. The spline are long enough so that the locking nuts can't come loose enough for the spline to pull out of the side gear. You will need to check the axle spindle to see if the bearing spun. It probably did. You will need to dimple the journals and dress them down to where the bearing fits correctly or you will have bearings spinning from now on. As far as the axle being in between gears, I would check the shifting mechanism. I am assuming you have vacuum. Either your spring that holds it in low is broken or you don't have enough vacuum to pull it into high. Hopefully thats all it is. Spider gears brake occasionally, and that is major.
