87 300td trans took a crap

[warmseth]

At least that's what I think. I was on the fwy and when I let off the gas there was a tremendous vibration, drag, and bad burning smell. When I shift to neutral things get a lot less dramatic and when I accelerate things also seem to mellow out but I think some sort of throw out bearing or something in the trans went bye bye. what are my options? what should I be looking at (short of a whole new car) on craigslist to replace this trans?

ps the car only has 160k. I'm pretty bummed.