Nope, "Just replacing the outer housing" isn't going to work.
(EDIT: I later got a chance to visit a forklift motor rebuilding company. The leadman there told me that the "magnet ring", the middle outside part of the motor with the permanent magnets attached, is actually a very common size. However, it is almost always used with pump motors, which do NOT have a drive shaft on them. HAD the armature come out with no damage, I very well COULD have just "replaced the outer housing". END EDIT)
I got a chance to actually remove the motor and take it apart. My worst guess was confirmed. The magnet shattered and jammed everything up, including messing up the armature.
Ick! What a mess!
Yes, that is shattered magnet everywhere.
I think that because the motor sits in the bottom of the tractor, rain water was getting in there for years, rusting it out. I believe that corrosion caused one of the permanent magnets to separate from the housing enough that it started rubbing against the armature and causing all the trouble.
Notice in the one photo how you can see the rust color where the magnet was.
See more photos of destruction here:
http://gallery.me.com/benhdvideoguy#101650