What's happening is the oil is getting into the tube, as mentioned, probably through off-camber, heat, or whatever means. Now, because the tube is small and capped on the top (a restrictor cap at that), and it is the only vent, the oil won't drain back down the tube. So each time this happens, a little more oil gets into the tube, and it remains plugged, so the diff won't breathe. Now, when you go from sea level to a higher altitude, you're going from a high pressure zone to a low pressure zone, which creates a suction on the diff (equalizing pressures), and causes some of the oil to come out, like sucking through a straw. On the heating issue, it's because the diff is actually being cooled when it's run, the ring gear brings oil into the air inside the diff and cools it slightly. It also disperses the oil around the diff, which has contact with the atmosphere, and is cooler (same principle as air cooled engines). When the jeep stops, the oil heats up slightly (due to lack of the cooling from rotation), and to relieve the pressure, vents out the tube, which has oil in it. There are 2 corrections to this problem:
1) Rip the stock junk off. Pull the fitting off the axle as well (it's pressed in, not screwed), and get a 1/8" NPT (National Pipe Thread) tap. Thread the hole (I use a vacuum cleaner to suck the metal flakes up so they don't go into the diff), and put a larger compression fitting on there (no clamps needed to hold the hose). Thread it in, and use like 1/2" hose, run it to the same spot. I use a small filter for the top, can be found for engine breathers, and are common. The whole mod will cost about $10, including the NPT tap.
2) Put another breather on. This will allow a second avenue for the oil to drain back into the diff. Kind of like a straw. If you put a straw into liquid and put your finger over the end, then pick it out of the liquid, the liquid stays in the straw. Now it you remove your finger from the liquid (add a second breather), the liquid goes back into the glass. It can be done the same way as the first method, which is just what people do, so you don't often find 2 breathers on rigs. It's also a second possible point of intrusion for foreign objects into the diff. The good thing is that you can run a smaller one so it doesn't need to be as large.
Either of these should solve the problem. I went one step further and linked all my breathers together on the jeep, ran the hose up by the roll bar for deep water (mini snorkel). I use 1/2" hose everywhere, and it's clear so I can see if oil (or anything) is in it.
JEEPN
Winter Harbor, Maine
'81 CJ-8 Scrambled!
It's a Jeep, Chevy, IHC kinda thing!