People, I am the happiest person ever. I almost couldn't be happier, except if I wasn't covered in ATF.

So based on the responses I got, I went ahead and dropped the transmission, and had one (#&$@^ of a time doing the whole job. Sure enough, the B2 piston was in 6+ pieces. It was an older style piston with the aluminum sleeve/bushing. I went ahead and replaced the bushing along with the piston, put in a new filter and drained the torque converter etc.

This is amazing. I never new that the car is actually supposed to go FORWARD when you push on the throttle.... All this time it just made a lot of noise and flopped about helplessly... but now... I literally feel like I bought a new car. I also learned a couple fun things: My flex disc is ready to go, and I have no shifter linkage bushings to speak of, which explains why shifting from R-N-D is so awkward.

I'd like to say that the right way to do it, is to also loosen the .. bearing??? (held on by two 13mm bolts) about a foot behind the flex disc, otherwise you won't get the transmission down far enough to do the trick. Also, others have said that you should get a pry bar in there and do it move it over, but for me it just centered itself after I let go. To remedy this, I made a wedge from a piece of 2x4 and I jammed that in there when I had it moved over. All in all, I found it pretty straightforward, well except getting that stupid bushing/sleeve out. That took more work than the other things. After spending several hours with a slide hammer, a pilot bearing puller, and screwdrivers, it was my finger that somehow, completely inexplicably, was able to pull it out.

Thank you all so much for your wisdom on this matter. Now that the transmission is running right, I now deem this car worthy for a real proper make-over. I can't wait to have to crawl back under there to replace the flex disc..... :/