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Here is a picture of the U-joint flange I removed from the driver's side of my 78. Look at how it has been ground down at the bottom of the cap bores. It is the same on both ends. Not sure what a previous owner must have done to grind them like that.
The flange bores still seemed to hold the U-Joint caps solidly. There were no problems with the U-Joints I removed, only the plastic dust caps were cracking and deteriorating. I can't see reusing it, even though it has held up through my ownership so far. Would you?
The upper 1/2 of the inside of the ears is normal. As long as the joints doesn't bind up in the flange you're good. Use new joints by all means.
Bolt the flange to a soild plate to prevent distortion and clean the bores with some fine emery. If the flange rocks while pressing down a flat surface that's not good-be aware the surface to check the machines flat under each hole -don't rock on the raised inner ring that's not a finished surface.
Gary