You could be right on suspecting the clutch itself. These have a habit of seizing, twisting the locator bracket and winding up the electrical harness from the seat switch up! To aid in your diagnostic, the main bearings are "rolling" when the pto is not engaged. Once the pto is engaged, the pulley runs pretty much w/ the inner clutch.
To remove the clutch, it is easiest to use an impact wrench. Or plan b- many times the heavy "washer" is a double D rather than round so you can grab it w/ a pair of channel locks whilst you turn the socket. While the deck is off, unload the traction belt and roll the idler pulleys. They're likely due as well.

tomplum, Thanks for the follow-up. I do have plans to change out the traction belt pulleys. Its interesting that the tractor is quiet when the PTO is disengaged (bearing loaded) but noisy when engaged (bearing unloaded). I would think the opposite. I ran the engine with the traction belt loose and PTO engaged , I still had the noise. I do have an air impact tool and will try that. I assume its a standard right hand thread. Last thing I want is to break off the bolt.
Dave

I have the clutch out. Upper bearing toward engine is rough and noisy when turned by hand. I guess I will be looking for new clutch. I don't think it can be rebuilt.

You may be surprised check to see if you can get the part here. If available work with your local JD dealer. (The farm machinery one not the big box.

http://jdpc.deere.com/jdpc/servlet/com.deere.u90490.partscatalog.view.servlets.HomePageServlet_Alt