The reaction shaft sealing rings are what your referring to and if one is cut and not sealing I don't know how it'd have reverse, unless the higher reverse pressure gives it just enough to make the piston engage??? That's a bummer man cause the trans. will have to come out and the front end back apart to replace it. That's why I always pressure test all clutch packs and band servo's before I button it up. As for not feeling the 1-2 shift in drive, it's possible the kickdown linkage just needs adjusted. If it's backed off the pressure is low and will shift softer. You might check that before you yank it back out cause if that doesn't cure it you have something else to look for. If you find nothing wrong you can eliminate the spring on the accumulator and put a blocker rod under it to keep it in place. The accumulator is basically softens the application of the front band (2nd gear band). I generally block anything that will have a 3k or higher stall converter cause the loose converter does some cushioning.
BTW: what were the clutch plate clearances?
