OK, so here's the resolution anyway. Our friend pulled and completely inspected the trans. He could find nothing obvious like a cracked valve body. He did find that the seals for the torque converter nose were bad. He also said that once inside he did see that the disks and clutches were quite worn even though the car gave absolutely no indication of that when you drove it, so he did a complete rebuild on the trans.

The trans operates like a gem now. S-M-O-O-T-H as can be. Nice soft, yet crisp, shifts. Quiet. It is also very obvious that the car is transferring more power and torque to the rear wheels now. All previous problems are gone.

The funny thing here, is that neiter I nor the trans shop guys would have thought that this trans needed rebuilding based on driving it. Other than the downshifting isssue and a slight hot oil smell, both of which only started recently, the trans performed what seemed to be flawlessly. I can now tell that much of the HP and torque was being lost in the trans, but I never got that impression before now - it seemed fine.

These transmissions must be freakin' rocks! For that thing to be in need of rebuild and still feel that solid - I'm astonished. The PO must have neglected this one like he did the rest of the mechanicals. He kept the body and interior top notch, but he was less than dedicated to the mechanicals.

Anyway, hope this helps someone else out.......

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Andy_M
'98 W140 S320 Black/Black
'06 W164 ML500 AMG White/Grey
'03 Porsche 986 Midnight Blue/Grey