(Solution now found, I will add it into the replies below). The car will upshift most of the times ok, but downshifting it will clunk pretty hard and pretty much all the time especially at lower speeds. Like you're driving along at 10 mph with the car in 2nd gear and it has to downshift as you approach a stop sign

It's possible this is NOT the transmission, but maybe something else. I replaced the transmission mount 2 years ago and the front (or was that the rear) flex disc 7 years ago. I have it at a transmission shop now, they thought maybe the modulator was the problem so they replaced that, but that made no change. We've sort of ruled out any vacuum leak because if there was a leak, it'd clunk all the time.

Any thoughts?

1991 300d, 196k