Don't turn the modulator down too much or there won't be enough line pressure and the transmission will slip. You definitely don't want it slipping. You can test the pressure it is currently making by connecting an oil pressure gauge to the test port. There is a spec that it needs to be in. First, check all the vac connections and make sure they are not leaking. Check the door lock vac feed as the W123 uses the same vac suource and is a common leak point. Plug it if it cannot hold vac and proceed to testing the rest of the system without the door locks in play. The VCV also has a specification that needs to be in order and tested. The bowden cable can play a role in hard shifts because if the transmission shifts too late, the VCV will be open more and less vac to the trans is supplied (assuming the driver keeps depressing the accelerator). It will result in a late and hard shift. The bowden cable should not be loose or tight on the throttle linkage. Check it for breaks around the ends as it is common and will throw off the adjustment slightly. Hard shifts are much better for the transmission than soft, weak, shifts. Some find that high mileage transmissions need to have firmer shifts to compensate for internal wear as the clutches have lost material over the years.

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1991 F250 super-cab 7.3 IDI. (rebuilt by me) Banks Sidewinder turbo, hydroboost brakes, new IP and injectors.
2003 S430 - 107K
1983 300SD - Tanoshii - mostly restored ~400K+.
1983 300SD - Good interior. Engine finally tamed ~250K.
Monark Nozzle Install Video - http://tinyurl.com/ptd2tge