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I would look into getting an ATSG 700r4 rebuild service manual. Then you can trouble shoot it better. It will give you specs on line pressures and guide you towards the components that cause what ever issue you're seeing. Another thing is the valve body may be too worn. When I rebuilt my first 4L60e I put all new seals in the valve body. Got a transmission code again. I had to take the valve body apart, made a boring jig and bored out one of the valves to install an oversized valve. It cured the issue. I really don't know much about auto transmissions, but was able to find tons of info on youtube for installing transgo upgrade parts for specific issues.
Okay, so before I start chasing this problem any further and go back into the transmission again or potentially go further than the valve body, I just want to be sure pretty much everyone here unanimously agrees the problem is inside the transmission and not some sort of weird vacuum/electrical/engine issue. I know that the high line pressure should be the dead giveaway, but I just want to confirm before taking the next steps.
Okay, so before I start chasing this problem any further and go back into the transmission again or potentially go further than the valve body, I just want to be sure pretty much everyone here unanimously agrees the problem is inside the transmission and not some sort of weird vacuum/electrical/engine issue. I know that the high line pressure should be the dead giveaway, but I just want to confirm before taking the next steps.
As I stated before, there are too many variables from what you describe to make a definitive "that's causing it"' A re-read of your symptoms indicates there could also be a problem with your forward clutch pack or the front one-way. Your high line pressure may have blown the lip seal on the forward piston. When you shift to 3-2-1, the over run clutch comes on and bypasses the front roller clutch. The over run is not active in D.
You could dick around with this trans several times and not find the cause. My advise would be to rebuild the entire unit, either yourself or get it done. Put in a rebuilt pump and valve body if you don't know what to look for in your old one. A master kit for these units is cheap and then you have a "new" unit.