When should a 1992 Subaru Legacy transmission be replaced? how many miles?

If you mean the release arm that goes into the transmission, removal of the transmission is required.

If you mean the rod from the slave cylinder to the release arm, undo the two bolts that secure the slave cylinder, and the rod will come out.

I suspect that you have higher mileage on the transmission and its a worn out the first gear clutch pack. I would get it checked by a proper transmission repair shop.

lucas oil makes a good transmission leak product

I've changed quite a few ignition switches on Subaru's after 150,000 miles. It could also be a bad connection at the starter (the small wire) or a bad starter.

My guess would be either the transmission fluid and filter needs to be srviced or the transmission is having a issue with the shift linkage.. Does it improve when the car warms up ?

The transmission oil has aged - replace it and the filter.

Sounds like the transmission has reached the end of service life. I have a 93 that did the same thing. It would drive until the transmission heated up then nothing, except for reverse. I had a TRW rebuild transmission installed and now my 93 Legacy has 500,000 miles. $2,200 to repair vs $25,000 to replace. The only thing you would miss is the new car smell for a few weeks. But you can keep $20,000 plus.

yes that is correct, remove glovebox , metal bracket in front ( mark which way round this bracket goes it will go back wrong and glove box wont fit ) , unplug electrical plug from heater motor, unscrew 3 bolts/screws from motor replace in reverse..30 min tops..

This requires transmission removal but make sure top have a proper clutch alignment tool which centers the clutch disc making re-installing possible

I think factory spec is 60,000 and if you go more than 100,000 you can expect a failure...
Hope this helps...;-)