I would almost bet on it. Looking at the wear, I would say the rear of the transmission is too high.
As far as speedometer error due to the drive gear, it's always a percentage, not a single number. If you're 5MPH over at 60MPH, you'll be 10MPH over at 120MPH. I don't know at what speed you took your measurements, but if it was at 100KPH, I'd be pretty happy with that. You'll never get it to be perfect. Another thing to consider is the speedometer head; they're not perfect either. This is especially true of non-police speedometers, in which "close enough" is exactly that. A cop speedometer is usually dead-on. If my calculations are correct, with a 1,000RPM input on the speedometer a Canadian unit should read just a twitch under 97KPH (60MPH). My old 9.6V Makita cordless drill runs at 1,000RPM on the lower speed. It's great for this test, and I've tested a lot of speedometers with it. Most are close; cop speedometers always seem to be exactly right.