It is a damper, and it can be removed without consequences! I had the exact same issue on my 97 T5. The rubber surround dry rots after a while, and the weight of the piece will shift it forward sometimes, causing a loud metallic clunk when it hits the yoke behind the tranny tailpiece. Try dropping one of the yokes off the driveshaft(either front or back), slide it off, then refasten said yoke and you're done. It didn't affect the driveshaft vibration at all!