How long did it take to engage drive or reverse leading up to this failure?

Now that you mention it, seems like there has been a bit of a lag lately before the gear would engage.
I will do the flow test with a transmission cooler line and report back.

Which transmission line should I disconnect for the test?

Thanks Jeff

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1984 300SD 300,000 miles--two tank WVO setup
2.88 diff & 500SEL anti-squat rear end