Question about tranny fluid

Hi everyone. I have a 2001 GT vert with the TR-3650 trans and have the usual problem with the gears grinding on 1-2 and 2-3 shifts when cold. I read through the FAQ about the issue and it was recommended to switch from Mobil1 ATF to Dexron III and lower the level to 3.2 quarts. The local parts places don't carry Dexron III but they had dex/merc which said it was applicable for all older ford transmissions. I spoke to a trans/gear shop and they said they were familiar with the TSB/fix but didn't seem to know about the level adjustment or have a recommendation about the type of fluid. I just replaced all the trans fluid per the owner's manual about 4 months ago (before finding this board) because of the shift problems so I am trying to figure out if I should just drain some of the fluid (Mobil 1 ATF) or should I drain it and replace with the Dexron III (or Dex/Merc).
Also, the trans shop said the parts for the TSB were about $675 and labor $250 for the rebuild if I bring them the tranny and an additional $350 to replace the seals, bearings, etc. Does that sound reasonable or should I try to find the parts somewhere else? Thanks in advance for the help

I have the TSB and read through the thread about the TR-3650 issues so I understand what the basic issue is with the trans but this is the first manual I have had since I was about 12 so I am not real familiar with rebuilding them. I thought the labor sounded a little low but again it is just to do the work on the bench and I will be doing the removal and installation of the tranny itself.
I agree about replacing a top of the line synthetic with a conventional oil being a dubious proposition but wasn't sure if the viscosity or some other property was responsible for the improvement in shifter feel. Actually, I was kinda surprised that they used ATF in a manual trans. I assumed it would use a much thicker oil but again haven't had much experience with manual trannys.
I asked the guy at the trans shop (Anaheim Gear in Anaheim, CA) about getting a rebuilt one and he said it was more economical to rebuild mine.
I also asked him about changing to a T-5 or T-45 and he said the 3650 was a much better trans once the fix was done.
My car has 108,000 miles so I figured I would do a full rebuild once it was cracked open