Thanks for the info. The this "slipping" between 3 and 4 only happens when cold. After it warms up, it works perfectly.

Thank you johnjzjz for your knowledge and input. I think you answered the engineering part of WHY its doing it. Now I need to figure out how to fix it; I will try adjusting the Bowden cable after I have done a fluid and filter change.

Yea, this problem ONLY happens when cold. Like johng99 said, once it gets warmed up, its fine. So I will try:

1.) Fluid & Filter change
2.) Adjusting the Bowden cable (if still not fixed)
3.) Adjust Vacuum modulator (if Bowden cable doe not work)
4.) Live with it (if all else fails)

http://www.peachparts.com/shopforum/showthread.php?t=182598
Link to my saga and help from Steve Brotherton, a real expert.

For me, adjusting the Bowden cable did not fix the 3rd to 4th shift flair. Adjusting the vacuum modulator definitely helped. I turned mine a half turn to firm up the shifts. It helped the flair, but made all of the shifts firmer. I am not sure if a flair or firmer shifts are more likely to decrease the lifespan of my transmission, but I went with the firmer shifts to minimize the flair. Mine is also worse when cold.

My understanding is that the flair is a sign that the transmission is getting on in age and showing signs of wear. Mine started after a fluid change at the dealer that was part of replacing the kickdown actuator and replacing all of the seals. I now have a leak free transmission with a shift flair that may need to be rebuilt in the not too distant future. The dealer told me I would need a new transmission, but I have been driving with the flair for more than 2 years.

Just a word of caution, be careful with shifting in and out of reverse. I was told that the reverse gear is most likely to fail, especially with the increased vacuum pressure after adjusting the modulator. Just be sure to be at a full stop before you shift into reverse.

Thanks everyone for the info. I have a leaking rear main seal that needs replacing, so it may well be that in the near future I will have the transmission pulled and rebuilt while fixing the seal. If I am going to do this work, is there any advice that you have on what work to do while I'm in there?
I am fortunate to have a good independent mechanic that is reasonable and knows MB transmissions well.
John

make sure you fab a tool or buy the tool ( on e blows ) to remove the servo piston one is easy you can hand push it - the other could take the tip of your finger off if you are not careful and be very mindful of the placement of the very thin and 1/2 dollar size shims you will find that space the unit = mixing them up will be a thing to EVER get it to work again - take your time and do not touch the unit with any kind of rag no place --- paper towel if you have to wipe anything < rag material will get caught up in the shift valves and by pass locations < NOT a good thing and hard to find -- jz

Thanks for the advice.

Its worth noting that my problem is non-existent when warm. Its only when cold that I get flaring from 2-3 and 3-4. Anyway, I will try the possible fixes I listed above and report back.

Edit: I just finished reading your thread with SteveB. The problem you were describing VERY similar, I want to say almost to the "T", but there are still some minor differences. Thanks for the linky!