Thank you for all this awesome feed back! Everything so far checks out, fan clutch is shot. Transmission fluid was a bit low. I added a little over a 1/4 qaurt of dextron VI (III was not available). t It seems to be a bit smoother I guess. Is it safe to flush a higher mileage transmission?
If I treat this worn reverse issue, will the Peachparts clutch & seal kit be enough to repair?
Found a few other things that need attention, so I will be surfing through the parts catalog.
I've been searching for a good write up for the fan clutch replacement, if anyone can point me in a more specific direction.
I have one other issue that I haven't really looked into yet. Terminal C in the fuse box looks a bit toasted. No melted plastic or anything. There was no fuse there when I bought, and when I put one in nothing changed. My power door locks still don't work.

I am a DIY owner. I have a few years of experience working on european cars. I rebuilt a transmission in a diesel w123 with guideance, so I'm not really intimidated about rebuilding just only the front half.

Slow Joe, I am indeed on TB: cfl940. I'm prepping the 240 currently for a B6304 swap.