I'm betting wheel bearing also... the early C4s had a tendency to go through the fronts in about 30,000 miles and the rears not long before or after. They are retained behind a flange that is secured by three BIG torx head screws. I think they are 20mm torx heads, been so long since I did mine. Mine was a1993, but I think the basic setup was the same throughout the C4 lifetime.
Before you drive it too far, jack the rear up so it takes the weight off both rear tires, now try to shake or wobble the rear tires top and bottom. They should not move much, less than about 1/8 inch in/out at the top or bottom. If one side moves a lot and the other side is tight, you "probably" found your bad wheel bearing.
As far as driving it around town, I wouldn't endorse it, especially if the roads are slippery, the disk brake on the bad side may grab more than the other or not at all because the bearing may allow the rotor to move in/out slightly causing uneven pressure to the rotor from the caliper/pad.
As a side note here, while everything is apart, if it were me, I would have the half shaft u-joints checked, and replaced if there is the slightest question on their service life. Also, the splined adapter that goes into the differential, and the seals. You might be able to get a good deal on the flat-rate time if you have a shop doing the work for you do everything while it is apart the first time around. But that would be me...
vettepilot