I agree, the B2 piston is broken or the seal blown. It can be repaired without trans removal. There is a modified piston now with a strengthened core and a totally different seal.
The piston breaking is often a result of higher than spec modulator pressure. This is often done to deal with flairs into 4th gear. The 83 trans has a number of modifications that improve the quality of shift. If you decide to rebuild it be sure that you have the mods done.
Bosch Master, ASE Master, L1
33 years MB technician