Sounds like a leak to me... It would be the first item of attention to replace it as all these modulators have is diaphragm like any vacuum motor on a car?

Your replacement must be the same color as the old piece(very important).

The attachment from this thread from post 8 may help:

http://www.peachparts.com/shopforum/tech-help/348463-300te-722-358-tranny-3rd-4th-gone.html

All the best,

Martin