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It could be bad synchronizers. Does it sometimes pop out of gear when you're coasting?

 

By the way -- did you swap the transmission? Because an '88 should have a BA 10/5, not an AX-15.

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To me, "clutch out" means the clutch is disengaged. I think you're saying it makes noise when the clutch is engaged, and the noise stops when the clutch is disengaged.

 

That, plus popping out of gear, says to me that the synchronizers are shot. Possibly due to using the incorrect gear lube in the transmission. Unfortunately, the factory initially said to use GL-3, but GL-3 was replaced by succeeding numbers. GL-5, which is what's generally available, has a lot of sulpher. The sulpher attacks "yellow metal" (brass and bronze). Guess what the synchronizers are made of.

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