From your description, it sounds like there is a grub screw (or 'set screw' as we say in the States) that tightens the u-joint to the tranny output shaft? That's very strange and certainly not a factory upgrade nor any "great idea" I'm aware of. The only use for that I can think of is that the u-joint has to be tight against the tranny. It is shimmed between the tranny and the u-joint so maybe he was using the set screw to maintain a firm 'set'. Even with that, there should be a roll pin through the u-joint and output shaft. I would go back to the stock setup.
The rear bearings are a weak point, but I heard more recently that the situation was pretty much fixed on the TC. The one thing you should make sure you have is a set of hardened spacers that go over the stub axle between the two bearing in the upright.
The half-shaft is not hardened (as it should have been). When you were talking about a set screw, I was wondering if your previous owner did what a machine shop guy did for me. After we assembled the upright and stub axle assembly, rather than use the D-washer and bend the washer up to lock the nut, he drilled an axial hole through the threads of the nut and the half shaft, tapped it and loctited a set screw in there. That nut is NOT coming loose.
There is a guy on ebay who makes an upgrade that uses hardened steel for the half shafts. It's not cheap, and I understand it takes a while to get them made, but it might be something to consider. There are also plans for modifying other half shafts (I think one is from a BMW, but you can find more about that here:
http://lotus-europa.com/manuals/). For the record, I'm using my stock TC stub axles.
Good luck and if you get a chance, give us a picture of what you're describing in case I misunderstood you.