AOD Problems

I did a quick search but did not find what I was looking for.

First problem:

I have a 90 LX 5.0 with AOD and 2.73 rear. My last AOD lasted 175,000 miles. I bought a used AOD off eBay while I decide what direction to go with this car.

The used AOD now has OD, which the old one did not, so that is a plus, but it is still doing the same thing the old one was. When I put the car in gear (Reverse, OD, D or 1) it seems to take a couple of seconds to engage the gear. If I don't take off right away, it feels like it pops out of gear. If I raise the RPMs slightly for 2-3 seconds, the gear engages and away we go. Does this in Reverse and Forward. It gets better when well warmed and drives very nicely the rest of the trip. My instincts tell me that I have crap in the valve body and the valves are sticking until the aluminum valve body warms up, expands and allows the valves to engage properly. Supposedly this trans was rebuilt a while ago but it sat outside for a while when the original owner took it out for a T-5 swap.

Will a valve body fix this problem? Is there some kind of band adjustment that can be done externally? Am I screwed and should start getting the T-5 swap together? (I know that everyone will choose answer 3. I think I prefer the AOD and would like to keep it if possible.) If I am forced to choose between a built AOD or t-5 swap, I probably will go with the T-5.

Second Problem:

I was getting about 20 mpg with the old AOD and no OD. That was cruising at 75-80 and about 2200-2400 rpm. I put in the new AOD and now have OD. Gas mileage is about the same.

2 questions:

1. WTF? Isn't there a reason for having OD? If not, why would it be in there. No, my driving habits have not changed.

2. Would a T-5 show a substantial improvement? I drive about 150 miles each day and would put in a T-5 with the 2.73 rear if I could get in the 25-27 mpg range. This car is for use in the mountains and to commute. Off the line is not that big a deal.
I religiously use cruise control and hate to give up my Mustang for some cheap pile of crap that I don't even want to look at.

Thanks for your help. If I can get the trans working correctly, I can start working on the cool stuff.

The fluid level has been checked numerous times. In park, engine/trans warm after driving on freeway for an hour plus. It is fine.

The tranny was not completely drained when I installed it. I will try doing a trans service today with Mercon 5 to see if that helps. I did not want to go and waste 12 quarts of oil when I installed it if it did not work at all.

Thanks for the input. Open to other ideas.

The torque converter is the one that came with the tranny.

I would think that TC problems would be more like the trans is slipping once in gear. In my car, once you get the car to go into gear, you can hammer it and it will accelerate without slipping. (No, I don't do it all the time, just once or twice to see if it was slipping.)

Anyone know what the difference between Mercon 3 and Mercon 5 is?

Thanks again.

I think that sounds more reasonable to me. Is there any way to increase the pump pressure without tearing the trans down? Would Mercon 5 (higher viscosity?) increase the pressure? Why does it work better when the car is warm? I would think as the fluid flows more freely it would have less pressure. I was thinking that it might be valves sticking in their bores in the valve body. As the aluminum warms up it expands and allows the valves to move more freely.

Thanks to all for information. I definately appreciate it.

Rick