Thanks for the input. I didn't change the upper drive belt. Will do that. The pulleys do have some wear. I'll take them off and take a light skim cut to clean them up, or replace them if their really bad.
I carefully inspected every pulley in the drive system. The only one that has any detectable wear was the the variable speed pulley. The wear was very minor and unfortunately the outer pulley half sheaves are welded to the shaft so I wasn't able to machine them.
Put everything together and no change. The tractor free wheels on downhill grades and the slipping gears/ratcheting sound is still there. For clarification the tractor pulls fine in forward and reverse on flat ground and uphill grades. I'm leaning towards the notion that the problem is in the differential even though the Toro dealer said it was OK. I'm stumped!!!