You had mentioned that you noticed a damaged inner seal on the knuckle? That would point me in the direction of the wheel bearing. Logic being a compromised seal would allow oil out and contaminants in. Or possibly the bearing failed first, and the unsupported/misaligned axle damaged the seal.
Difficult to say without seeing it. I would personally remove the cv axle from the hub and rotate the hub by hand feeling for any play, grinding, tight spots as others have mentioned.
If the bearing is good and the cv axle is good (they can be disassembled to inspect if need be), my next suspect would be the differential.