try the lube gard snake oil first - the little red bottle, it has worked for me on Toyota and GM transmissions where it freed up sticky situations.
Another thought is that the shift linkage, does the engine hang off the engine rpm governor if you floor the pedal? Does it shift 1-2 at full rpm only.
Which makes it sound like its driving in 2 rather than D
on the other hand
check this thread
http://www.peachparts.com/shopforum/diesel-discussion/327394-722-4-transmission-now-shifts-first-fourth.html
you will find the chart that shows the band and clutch apply chart for your transmission too.