Joe,
The drive gears have a flat area at the top of each tooth when new. As they wear this flat area decreases in size untill the tops of the teeth are pointed, and none of the flat is left. Then, as the points wear they get shorter and shorter. My drivers are worn down to the point I have a new set here ready for installation. Jim is right, the noise you should have heard was a popping noise. If you were slipping the gear at a good clip, this noise could sound like something tearing or grinding I suppose. You should be able to do a manuver at a slow speed and then maybe it would just pop like you would expect....
I am always watching the bearing holders in the variator that move the sheeves. The torrington bearings under each are uncaged balls, and I am always worried about them eating up the sheeve surfaces if the are bad. They are usually over greased, but if they are not greased, they can become an issue in a hurry IMHO. Not to hard to tear it down for a look on the passenger side. It is the one I have issues with as the grease tube to this bearing under the sheeve is torn in two. You wouldn't notice this untill you fallow the line with your had back up under the sheeve set. The bearing holder is free to float, and will try tuning a little bit in use. In my case the old fabric covered grease line couldn't take the torque and failed. Now I simply turn the bearing holder till the inlet can be reached by the torn end of the hose and slide it on the tube, and hold it there while I grease it. The other side is a bit more work to tear down, but worth the effort if needed. This bearing on the drivers side has no grease tube at all, as it is on top, and in plain sight. Hope this makes sence....
Hope you figure it out.
Regards, Kirk