Hi Bill,
If your bearings are worn enough, yes this will drop the pinion down creating less gear mesh.
I do not know if you use grease on the rack teeth or not. There is a debate on both sides of the fence to grease or not to grease. I myself, grease and I grease the bearing area. And the roller bushing buried up in the inside the rack arm. You can only see the arm end inside roller when the slide is out.
Back to the pinion mesh, open gears leave meshing tracks on where they touch. You can see on the rack teeth if the mesh is not on the center area like it should be. It would be more on the outer part of the tooth. And you would have a lot of back lash. If you pry up on the pinion shaft and see a lot of play, the bushing are bad.
Having that pinion lower is a pleasurable explanation on how you can jump teeth. The slide arm/rack is not lifting, the pinion is lowering and that can happen.
The bolts that are froze up, yes, like Westend said, try and get some penetration oil in there and juice it well and over night.
If you have a hand torch, that can help too. Don't know if you setup will allow heat and not get the vapor barrier. Or if one of your pinions is buried inside a tank compartment like one of mine is...
And this is another option. Unbolt both pinion bearing housings and drop the entire shaft, bolt and square shaft out. Then you can deal with the frozen bolt out in the open. This is mine, yours should be similar.


Worst case if you can not unscrew it out or punch drift it out, turn the shaft until the bolt is straight up and down vertical, prick punch the center of the bolt head and drill it out. Start with 1/8" bit in case you are off center and only go up in 1/64" bit sizes. Only enough to get close to the edge of the bolt. You really do not want a full 1/4" if you can help it. Once you get close to 1/4" then try driving it out again.
As an FYI, I know folks have called the 1/4" bolt in the square shaft a shear bolt. That may be a miss conception. I'm not 100% sure on the hydraulic units but on my electric unit I have an overload clutch that trips when the slide is all the way out. The motor drive will not create any more torque then the overload clutch can give. The clutch will trip before the 1/4" bolt shears. And on the retraction, some slides ratchet the clutch too on the way in. But on mine, the motor just stops, no clutch trip. I basically ran out of motor power as the slide flanges rest against the side of the camper and the stop can and you let go of the button. Again the bolt will not shear as the motor drive does not have enough guts to shear the bolt.
There may also be some logic in using a longer bolt so the body diameter is fully or partly in the square shaft and the pinion shaft. That full body diameter creates a better slack free connection. If there is a full threaded bolt in there, it will wiggle and eat on the threads of the bolt creating a loose connection. Over time it wears faster creating an out of time connection. For what it is worth, mine also has an almost full body bolt. And there may be 3 lines on the head indicating a grade 5 bolt or 6 lines inducting a grade 8 bolt. No lines it is a grade 2.
I could not find in the LCI manual any mention to a shear pin setup. This would not be the conventional way to create an actual shear pin setup if it was suppose to be. It might be campfire thoughts that this is a shear pin setup and not actually one. It is just a economical way to connect the shaft to the square tube.
What ever you do, when you put a new bolt back in, grease the outside of the bolt real well or put anti seize on it. That will help the next time you have to take that bolt out...
Good luck and let us know how it goes.
John