It looks like it from heat. Is everything ok behind the gear???Maybe it rubbing to whatever is inside and getting hot. If you run the car for some minutes and touch there how hot is it???
Since it is cheap and not worth a bigger damage if it fail, I suggest you change it as soon as possible.

what kinda damage would you have if it failed??? it would come a part and coast to a stop because there is not power going to the wheels. you could even hit the brakes. i dont see a problem with it but if you do buy a new one buy a couple extra ones because there is nothing like a bald spur gear to ruin your day.

You are right that probably you will just have no power and the car stopped. But on the other hand I have seen some very strange stuff all these years to make me a bit too careful.

i just cant imagine it being a problem. and dan, yuve been silent. did you fix this or what??

no, I checked it out. it all seems fine, so i will leave it for now. I think the screws were to tight. I had tightened em b4 all this happend so we will see!