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TEst for slipping clutch is travel about 30 mph. press clutch, shift to 3rd, rev engine pretty high and release clutch, at the time of clutch release, floor throttle. If the engine continues to race, clutch not grabbing porperly, if the clutch works properly, the engine will be slowed and engauged.
You can always get a 2nd opinon from another shop.
the 85,000 mile coutch worn out issue dependes entirely on driving habits of the operators.
If the fluid is coming from the bell housing of the transmission, your front hydraulic pump seal has walked. The only fix for this is to remove and rebuild the transmission. This commonly happens around 200,000 miles.
most people say no to a high mileage transmission flush if it hasnt been done before on the vehicle, I say if it starts to slip then flush it but if it is just sticking whop the old lucas trans mission oil to her! they have it at advanced it should free up those sticky valves! but if you havnt flushed it before now i would'nt it is believed that over time your transmission fluid gets "gritty" from the clutches wearing , and over time your transmission becomes reliant on that grit to run "smoothly" I've done it and it came out fine but that was due to slipping from thin or burnt transmission fluid, I would really try an additive to free up the valves before i'd do a flush!
this sounds like the transmission torque converter clutch is not releasing, it causes this exact symptom. Have a local trans shop test drive it, in these tough times they will do that for free hoping to get the repair job.
there are several issues that need to be addressed. I imagine that the trans oil and filter have not been changed in a while so that is a first step in fixing the problem. trans oil and filter should be changed every 50,000 miles for atf oil and 75,000 for synthetic oil. old trans oil and clogged filters are #1 reason for trans slippage. another reason is the trans controle cable is out of adjustment and there fore the trans doesn't shift like it should this is something that needs to be looked at by a mechanic. third possibilty is either the check valves inside the trans valve body are gummed up or you have a failing torque converter. try and get that oil and filter changed and see if this helps solve it if not than you need to takeit to a shop and have the trans rebuilt.