shifting issues?

Sounds like the governor valve is sticking. That makes the valve body think the car is still moving. If the problem doesn't resolve itself, start by running a can of "mechanic in a can" though it. I've heard good stuff about "Sea Foam" but I've never used it. It will dissolve varnish buildup that can cause valves to stick.

This guide can help.

https://www.2carpros.com/articles/automatic-transmission-problems

I had a similar problem with the same transmission in my '88 Grand Caravan a few years ago. It had been many years since I hit wide-open-throttle until one night when I was troubleshooting an intermittent cruise control problem. When I grounded one wire with a test light it caused the servo to pull the throttle wide-open. Right after that it up-shifted way too late and would not down-shift soon enough. It also stuck in second gear unless down-shifted manually. Since I knew the history it was plain to see it wasn't a mechanical issue. The problem gradually cleared up over a period of a couple of months. This would be typical of varnish buildup in the bores where some valves had not been running in for quite a while. Prior to that it did have a slightly delayed up-shift for the first time of the day on really cold winter days but it wasn't very serious. I didn't add any chemicals, and the fluid and filter have only been changed once in its 22 year life. (I drag a huge tandem axle enclosed trailer with it too). The band adjustment you mentioned doesn't affect shift points, just quality of the shift feel.

I have a basic understanding of how the gov pressures work but is it possible that a sticking governor valve can cause the 2-1 downshift problem while still allowing 1-2,2-3,3-2 to work normally?

Absolutely. I'm trying to think of how to describe it, but think of it this way, . . . Well, first of all, the governor valve sits in a housing in the middle of the output shaft. That's the shaft that drives the final drive gear and differential. I put together a simple line drawing that might help. On the left drawing, the red governor valve starts out just slightly off-center. As the shaft spins, centrifugal force flings the valve out to the side against spring pressure where it is shown. Think of it as a spring-loaded pressure relief valve, but as it moves, it takes more pressure to unseat the relief valve so fluid pressure increases as the valve gets flung out harder at higher speeds. That pressurized fluid flows to one end of a shift valve. Line pressure, which increases as the gas pedal is pressed further, is applied to the other end of the shift valve. Those two forces determine when the shift valve moves. If you accelerate harder with the gas pedal pushed real far, that high throttle pressure holds the shift valve in the "1" position. When road speed gets high enough, the governor pressure gets high enough to force the shift valve to move. That valve opens the passage to send fluid to the next clutch pack and it bleeds fluid pressure from the previous clutch pack. That fluid going to the new clutch pack has to push on a spring-loaded piston first to fill up an "accumulator". Since it takes time for that to happen, the fluid pressure to the clutch pack gradually rises as the accumulator fills. That softens the engagement of the clutch pack. Removing that spring and piston removes that cushion. That's what they do with automatics used for racing. Under hard throttle it will chirp the tires when it shifts. For the rest of us that would be very uncomfortable. Anyhow, if you could imagine the governor valve and the throttle valve welded solid midway in their bores, the up-shift to second gear would not necessarily occur at the same speed as the down-shift when you were slowing down. Enough difference in fluid pressure has to build up before a shift valve will be convinced to move. That could be as little as a pound of pressure, or, if there is a little varnish or debris causing the valve to stick, it could take a few pounds of pressure difference. Also, because of that varnish and because the governor valve is fighting spring pressure, it might be quite happy to move one way but reluctant to move back the other way. The governor valve causes the applied pressure to go up or down in relation to road speed, so that pressure is variable. All it takes for the governor valve to stick is a little varnish on it or the bore. Governor pressure is supposed to be 0 psi at 0 mph, but if the valve sticks, you might find 2 - 3 pounds. That, to the shift valve, means the car is moving, and it might appear to be moving fast enough to stay in second gear. After you move the shift lever to manual "low" or "1", the shift valve is forced back to the first gear position. It may need to see 10 pounds of governor pressure before it will up-shift again so even though the governor valve is sticking at 3 pounds, it isn't high enough to cause an up-shift until you really do start moving.

Ok! I think I actually understood that quite well. Thanks for the detailed explanation. Let's see if I got this....So if the gov valve is sticking and holding pressure at 0 mph then that pressure is essentially preventing the 1-2 shift valve from going back to 1 unless I move the manual shift lever into low (1) which hydraulically causes the 1-2 valve to reset to position 1 therefore forcing a downshift. Is that right? My next question then is, could it be the 1-2 shift valve in the valve body that is sticking in the 2 position and not the governor valve? And if so, is there an easy way to determine if it is the gov or the 1-2 shift valve? Obviously I think I need to pull the valve body again and check out the governor assembly. but any thoughts?

The 1-2 shift valve moves strictly from fluid pressure on both ends. Those pressures change quite a bit so it isn't likely it will stick against that. It also snaps between two positions while the governor valve has to move slowly and smoothly. The governor valve gets pushed back by light spring pressure. It's pretty easy for him to stick. The definite way to test it is to measure the governor pressure. There's a whole bunch of test ports on the front of the transmission. The governor test port is on the driver's side below the side cover. The pressure must increase smoothly as wheel speed increases and it must go instantly to 0 psi when the wheels stop.

Ok, got it. It'll be next week before I can get to it so I'll tear into in then and see what's up with the governor. I appreciate the help and I'll let you know what I find.

Just a late follow up....pulled the pan and this time it was filled with many broken segments of the band lining. Not sure how or why that happened but I said screw it, got a junk yard tranny for $300 and spent a weekend swapping it out and now all is well.

Well, at least it's working now. Happy to hear you're peddling down the road again.

Thanks for your help!