I'm pretty sure Andy is referring to the circlip that holds the axle stub in the front diff.
#10 in this diagram:
That's from my 2001 service manual.
I don't know if the 1997 is different, but on my 2001 the axle stub (12) remains in the diff when you pull an axle. You remove the roll pin first, and the axle just slips right off the stub.
If the axle stub fell out of the tranny, I'd guess the circlip (10) and/or the roller bearing (6) are toast.
According my manual, parts 6 thru 9 are removed before you install the axle stub. The order of assembly is:
1) install NEW circlip (10) onto axle stub (12)
2) tap axle stub (12) into diff case (5) with plastic hammer
3) check axle stub thrust play, should be 0.3-0.5 mm; if no play, replace stub
4) wrap vinyl tape around axle stub splines
5) install NEW oil seal (7) and roller bearing (6) onto side retainer (9)
6) coat retainer threads with oil and screw retainer (9) and NEW o-ring (8) onto tranny
7) install lock plate (11, T1 = 18.1 ft-lb)
Note: Oil seal is a different part # on each side.
Again, this is from a 2001 manual. And I have not done this procedure myself. When I swapped one of my axles last fall, the stub remained in the tranny. The oil seal looked perfect, so I had no reason to pull it.