JJs49er,
1. The bellhousing on the rear of the tranny covering the u-joint won't come loose. Is it supposed to just slide back or what?
The outer surface of the torque-tube, behind the collar, has to be completely/shiney clean in order for the collar and "bell" to slide backwards.
2. The front crossmember on the drivers side has about 3" of rusted out area. Can this be repaired without replacement of the cross member?
It is hard to answer this question without seeing the damage (is this the cross member under the radiator?). It might be repairable by a skilled welder, depending on the extent of the rust-out. Most likely you will need a different frame or crossmember - a frame should be fairly easy to find.
Tim