The downshift "clunk" is generally caused by not enough vacuum being sent to the modulator valve via the vacuum control valve on the injection pump. When new, the valve should have 19 or 20"Hg going to the transmission when at idle (accelerator not depressed). If you have less than 15"Hg or so, the transmission thinks that you are trying to accelerate, so it downshifts into first gear, hence the clunk. When operating properly the transmission will stay in second gear when you slow to a stop, and will only shift back down into first when you hit the accelerator (and the vacuum signal to the trans drops).
I had the same clunk in my transmission. It turned out that I only had 13"Hg at idle, which was caused by leaks in the vacuum system. Since this car is only used for off-road racing
, I plugged the lines going to the 2/3 switches on the valve cover that control the EGR. I also disconnected and plugged the vacuum lines for the ACC (I have at least 3 leaking vacuum solenoids). This bumped my idle vacuum to the trans up to 17"Hg, and the downshift clunk is no more
.