Could be one or the other or both. Remove the vacuum line going to the transmission modulator so the transmission is operating with no vacuum at all. If all shifts firm up, then you know the flaring is causes by too much vacuum. If there is no change, consider installing one of the shift kits available to solve these kinds of problems.

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1977 300d 70k--sold 08
1985 300TD 185k+
1984 307d 126k--sold 8/03
1985 409d 65k--sold 06
1984 300SD 315k--daughter's car
1979 300SD 122k--sold 2/11
1999 Fuso FG Expedition Camper
1993 GMC Sierra 6.5 TD 4x4
1982 Bluebird Wanderlodge CAT 3208--Sold 2/13