Traction control light is on and the transmission shifts hard.

Have the vehicle control modules checked for DTC'S - diagnostic trouble codes ! This will point you in a diagnostic direction . Probably a sensor or a solenoid inside the transmission . Find out what codes are stored in the PCM/TCM

Sounds like something broke. My older car is starting to do strange things also. I was told that the new cars are more electronics in the transmission to control shifting. and only a good mechanic or transmission shop will be able to read the codes to find the defective part. hopefully it is just a part that can be replaced with the transmission on the car. I suggest getting a referral from your mechanic.

This is all electronically controlled by the PCM - engine computer an EBCM - electronic brake control module . An this will affect the transmission as well because everything is all hooked together electronically .
Engine Traction System Indicator
TRAC OFF
The instrument panel cluster (IPC) illuminates the TRAC OFF indicator when the electronic brake control module (EBCM) inhibits the Engine Traction System due to a malfunction in the Engine Traction System. The IPC receives a GMLAN message from the EBCM requesting illumination.
Your best bet is take it to a ASE certified repair shop or a GM dealer , Chevy , Buick , Cadillac . seeing how Pontiac isn't any more .
YoY

According to http://repairpal.com/OBD-II-Code-P0500:

Vehicle Speed Sensor Malfunction
Symptoms

• Check Engine Light will illuminate
• Vehicle may not shift properly
• Speedometer may not operate correctly
• In some cases, there are no adverse conditions noticed by the driver
• In some cases, there may be performance problems and/or shifting problems.
• Other warning lights may come on such as the ABS light and Traction Control light.

Common Problems That Trigger the P0500 Code

• Defective Vehicle Speed Sensor
• Defective Speedometer
• Vehicle Speed Sensor wiring or connector
• Communication (CAN) bus problems
• Defective transmission or differential Vehicle Speed Sensor drive gear

Common Misdiagnoses

• Speedomter problem
• Internal Transmission problem
• ABS/Traction Control probelm
• Driveline problem

take to a transmission shop for a diagnosis , should have gone a bit sooner before getting thes eother codes etc

the ABS system is defective, probably one or more of the sensors.

Traction control system works with the ABS sensors to monitor to monitor traction slippage.

Take it to a shop. Don't fool with it. It has to do with the traction control.

The traction control and transmission shifting would involve the body computer more so than the engine computer.
Have you had the body computer scanned for trouble codes ?

youll need to scan for transmission codes. the trac off light is a default of the trans going into a default safety mode. Bad speed sensors and simple little bolt on items like that can cause the condition but only way to really nail it is with a computer.

The Transmission is likely shot. That year along with others had transmission defects. My new 2002 TLs died at 21k miles. I go to Acura for most all service and they gave me a $1500 discount on a tranny. It still cost me $3500.