Finally have had the chance to start investigating this clunk. I have checked strut tops, the bolts at the bottom of the struts, drop links sway bar bushings etc. And all good. Checked engine mount, all ok. Now, just buy chance, with the car on the ground I grabbed the right side drive shaft and it moved laterally at least 5mm and "clunked" every time I moved it. Left side does it too.
So questions - is this movement normal? Or if it's not normal is that indicating either my CV joints are worn or maybe the drive shafts are moving on their splines for some reason?
When you say you grabbed the driveshaft, what part do you mean and where did it move? You grabbed the shaft sticking out of the back of the hub and it moved in and out of the hub (with the CV joint)? Or did the shaft move in and out of the outer CV joint? Or did you grab the large diameter part that sticks out of the g'box (inner CV joint) and it moved in and out of the g'box? Any other options I did not cover?
First question, if yes, that's not normal. Check the driveshaft nut on the wheel face of the hub. Is it tight? Can you pull it out/push it in by hand? If yes, no that's not normal, do the nut up. If the nut is done up and staked and it doesn't look like it moved, your wheel bearings are probably about to turn to creme brulee. There is also the possibility there was some spacer/large washer/shim/whatnot someone forgot to install and the bearings are not correctly pinched with the nut done up correctly. Check.
Second question if yes, it's not normal. Your outboard CV joint is not healthy. At best, you lost the circlip that locks the shaft end behind the ball carrier inside the joint. At worst, your entire CV joint is so worn the balls are sliding back and forth. Replace the joint or the entire driveshaft if you can.
Third question if yes, it's kinda normal but shouldn't be able to move it by hand, there should be a definite detent felt and you should need a rather serious tug. If this is it, your inboard joint shaft moves in the outdrive and you need to investigate further why. Usually the driveshaft inboard shaft has a circlip that goes over the (male) splines and locks into a corresponding groove in the outdrive female spline at the g'box. Hence the clear detent if you manage to pull one out (and a clear clunk when you push it back in and the circlip expands back in the female groove). It's supposed to keep the driveshafts from falling out. Maybe you lost the circlip, maybe something is worn or whatnot. They should definitely not come out pulled by hand. At best you need a flat blade screwdriver to lever them out with enough force to compress the circlip. There is a bit of movement there as the circlip is not a tight fit in the groove but not 5mm. Maybe 1-2mm.
Keep in mind, I speak from general experience with other cars, I don't know the 306 specifically but pretty much everything else I've seen is like that, Toyota, Honda, Renault, Hyundai, even other Peugeot models. Hyundai in fact need a fair whack to get them out.
To summarise, none of the driveline components should move laterally (axially?) at all. Something is amiss if they do. They do move in normal operation but only with the suspension compression/extension and the entire movement is taken up inside the inboard CV joint (the joint itself doesn't move). Somehow I don't think you can compress your car's suspension by pulling the driveshafts but if you can, post a video on youtube and we'll call you Hercules.
You didn't mention tie rods, did you check those?
