"That backing plate looks to be well coated in lube. As you commented - an issue that makes the brake pads near useless.
Hydraulic line locks or moving to some cable operated parking brake?"
Not as oily as I expected it to be - maybe all the dust caked up the oil. The very liquid gear oil is from having to pull the yoke off the D18 output before you can remove the drum and backing plate. The output seal sits around the yoke, so one its pulled, the oil in the case can pour out between the seal and output shaft. That is one of the reasons we didn't want to remove the yoke in the field and went with the cut the drum method. Short term, I will run without a parking brake (or yoke dust cover) - but functionally that is basically what I have had for years anyway. Pulling the parking brake lever is a sort of placebo effect. Long term, the plan going forward will be upgrade the rear brakes to include a parking brake function....I have a set that I was about to put on the 58 wagon - once I figure that out, and if it works nicely, I'll probably do the same with the cj. Its basically the 11" drum brakes that came on later CJ5/7s, and they are pretty much bolt on....I run the equivalent 11" drums on the front of the CJ. The only part I am not sure about is how to get the mechanical pull cable set up right. Also, when/if i get around to swapping the trans, I will replace that rear cap on the D18 with a shorter one that was used from the factory without parking brake mount. That inch shorter will really help offset some additional length that comes with the 4 speed, and help keep the rear driveshaft as long as possible - every inch counts in such a short wheelbase rig.