Freelander 1 Rear Diff - Oil Thinning and Seals Leaking

Whilst under the car doing my regular dust and polish - noticed all diff seals were oozing orange liquid.

Checked oil - by sucking out a sample and found it to be thin and orange watery substance. Rear diff oil was changed about 2 years (20k) ago.

I guess water has got in - anyone else had this problem, is replacing the oil likely to stop the leaks at the seals (as it will be thicker) or is a recon diff the best way out of this one? There is about 20 deg of slack in the shaft when disconnected from the drive train. Would a new collar and seal with suitable tightening as per Rave likely to solve this play or is in in the gears inside. The diff runs quiet currently. Is there an easy way to change seal at prop UJ without pre-load problems??

I expect water has got in through the breather tube.
I'd refill with fresh oil and replace the oil seals. At the same time, make sure the breather tube is secured into the diff.