The 2-3 shift flare could be as minor as a modulator adjustment, or as major as a rebuild. Typically, it's valve body wear.
As far as taking heed of the behavior as being "on its last legs", I have a donor tranny awaiting transplant on my daily driver 300E, as I get the same "flaring" on 2-3 and sometimes 3-4. That was 2.5 years ago when it started doing that, and the original tranny hasn't worsened a bit...so I've delayed the swap until it actually goes south.
I wouldn't be too hasty to call yours DOA just yet...
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2009 ML350 (106K) - Family vehicle
2001 CLK430 Cabriolet (80K) - Wife's car
2005 BMW 645CI (138K) - My daily driver
2016 Mustang (32K) - Daughter's car
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