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Hi there.
I have just been quoted $2125.00 all up to repair a noisey centre differential on a 2002 Subaru Legacy Lancaster 3.0L with reworked 2nd hand diff parts. The cost is for labour and parts.

1. Do you believe this to be a fair price for the work?

2. Is it necessary for me to replace the dentre diff now, or can I continue to drive safely with the noisey centre diff knowing the noise will progressively get louder?

3. If I choose to not undertake the repairs now, what further damage could occur to the centre differential or any other parts of the car?

Regards, Malcolm

Without knowing what is causing the noise, it's not really possible to give definitive answers.
Having said that, we could easily see the job costing over $2,000, depending on the problem.
Any differential or transmission that is noisy has the potential to cause further problems if you continue to drive it. Noises are generally the result of failed / collapsed bearings or gear meshing problems. Either of these problems can cause swarf or filings to cause further damage, and in the case of bearing problems, continuing to drive the car can cause housings to wear, having the potential to completely destroy the differential.
If you are in any doubt about what your mechanic is telling you, get a second opinion (maybe from a specialist Subaru mechanic or a transmission specialist). However, it sounds like a problem that should be attended to and not continued to be driven.

Thanks for your comments and advice.