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I usually pull the engine as it is easier with the tools I have (cherry picker, etc), and I end up with more room to work that way anyway. If the timing belt is due any time soon, I would replace it and the cam seals, front crank seal, Oil pump O-ring, and valve cover gaskets at the same time. That way you do not have to worry about much of anything on that engine for a good while to come.

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I just did a 96 Legacy clutch this last weekend. I went with the engine this time and it was easier. I've done it both ways.

 

If you have a forklift or engine hoist the engine is the way to go. If you only have a floor jack, drop the trans. Lots of work on the floor that way but you'll get the job done.

 

Make sure the two front trans cross member bolts go in and don't cross thread. Many times I've had to enlarge the holes in the cross member to get them to go in straight.

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