transmission will not shift above 2nd

[mcguiver7]

83 300d euro

will not shift above 2nd gear. the vac modulator was replaced. there is 10 hg of vac at the line going to the transmission at idle. when accelerating the throttle the vac goes up as opposed to going to 0. i read that this is due to the vac control valve not bleeding off correctly or either poor 3/2 valve. the system is very simple minus egr. 2 vac lines from vcv go to one side of the 3/2 valve and the 3rd line goes to the transmission.

with the vac line pulled from the transmission it does the same thing. it will shift from 1st to 2nd fairly quick and smoothly. should the trans still go through all the gears even with the vac line disconnected?

Matt