first could someone tell me what the swaybar actually does and how do i know when to replace it. also i noticed a little rubbing inside the wheel well could it be the panhard.

 

heres a pic of the drivers rear wheel well
you can see where the tire has rubbed off the rubber coating, the white paint, and now on to bare metal.

 

The sway bar connects the wheels together, so that they can move up and down together, but rectricts their seperate up and down motion, to restrict body roll. Think about it. If your car leans to the right if you're making a turn, the right wheel moves up (relative to the body) and the left wheel moves down(relative to the body). A sway bar connects the wheels so that they do not move as much, and you do not have as much body roll. As far as I know, as long as they are not broken, they never wear out.

As far as your wheel well, my wheels rub when I turn hard, like when I'm in a parking lot. The only thing you can do is go slow and try to take sharp turns as gradually as you can. I don't know if rubberized chassis coating would stand up to the wheels rubbing on it, maybe it would work.

 

You should never need to replace sway bar unless you either damaged it or want to upgrade to a thicker lighter one. What you should replace are the rubber bushing with new Energy Suspension or similiar bushings, advancments in polyeurathane compounding has created much better cushion with higher resistence to stress and wear than the old rubber ones that are probably hard as a rock now.