[screamingchief]

As should be obvious at this point,many things can cause similar issues and still be completely different issues to try and solve or diagnose,so I'm not gonna mislead ya'll into thinking I'm giving you the best answer to this problem,I'm just giving a few thoughts to ponder.

That said I've run into this sorta issue with the very first TH-400 I rebuilt myself,so I can only tell you what caused my problem of this nature.

Many sources recommend removing the inner lip seal from the forward clutch apply for more holding power in high performance TH-400 builds,this is a very common high-perf mod for that trans,what many sources forget to tell you is that you also need to block/seal the passage for the reverse feed circuit when you do that (either in the VB plate or at the center support) as that circuit will backfeed and you'll either loose reverse completely,or in my case I lost the engine braking in manual low.

When that was going with my trans,reverse still worked fine,drive still worked fine,and only the low (1st gear) engine braking was not working properly,and yes it acted very odd when using the manual low ranges,it freewheeled when it should have been engine braking,then if you apply the gas it goes right back into 1st gear,occasionally with some mild drama involved.

Only later on after rebuilding a few more TH-400's did I learn of the cause of that issue with that trans,it was a simple mistake caused by following a magazine article that told only a portion of the needed info for a proper modification...

So my "best guess" is either the forward clutch lip seal mod was attempted and not done correctly,or the inner lip seal on the forward clutch was damaged when assembled or something to that affect.

If you look into the hydraulic flow diagrams of these circuits like those in the Ron Sessions TH-400 handbook you can clearly see why this happens,the pressure that is bypassed/backfeeds from the forward clutch pack directly disengages the rear servo much the way it does when the car is in the D ranges.

HTH.