727 puking out the front seal

The front pump has a vent built into it and that's all you need, as long as it's clear and venting properly. A plugged transmission cooler can also cause it to blow the front seal. Check/clean or replace the cooler and lines as necessary. It's possible that if it sat uncovered (or not sufficiently covered) dirt/garbage got into it plugging up something.

For the shifting problem, that is known as flare up. Do you have the throttle pressure (kickdown) linkage hooked up and adjusted properly? If not that'll cause flare up. The action of applying the front band is what gives you 2nd gear. If the throttle linkage is ok it's a problem with the application of the front band. Either not adjusted right, low fluid level, or a servo or valve body problem. Make sure and check and adjust all clearances as necessary. Proper clearances are key to a trans. operating right. Also when rebuilding it make sure and air test the clutch packs and band servo's as your going to make sure everything will work right when it's all assembled. If you need a picture from the factory service manual for where to apply air let me know and I'll post it.

Also consider a Trans-go shift kit while your overhauling it. Trans-go kits are excellent kits that address the deficiency's torqueflites have. Their customizable so you can make it shift just a little firmer or extra firm. Whatever you like.