I read on another forum that a fellow had a very similar problem, and it turned out to be the filter was glogged, and somehow that was causing this funny sounds-like-a-slipping-belt noise.
In all my searching, it's the only similar set of symptoms I found.
He's going to change the fluid/filter (cheap) and see what the results are. We're doing it at my place tomorrow, I'll see what that does and see what it looks like when we drop the pan.
He's a little disappointed at the short tranny life, but 170K-miles isn't that bad.
1998 C230 "Black Betty"