More than likely the TOB is toast yes. Can't say for sure yet, but you could put a stethoscope inside where the rubber boots covers the bellhousing and hope it does not wing off moving parts while you scope out that sound.

Well, not that this is a laughing matter, but it is probably the TOB with a lack of lubrication, or at least we hope that is all it is. Once that transmission is down, it may be best to look at replacing anything you can inside that bellhousing while you can. Clutch fork of the first design and a stronger pressure plate like the 2600 can mean breakage long term. Pivot ball, TOB, fork (gen 2 style), slave, master, braided clutch line are all things to consider depending what combination you have right now and how new they are.