Rebuilt 904, no 3rd gear???

Sorry I wasn't clear on which pressure tests, I was referring to doing air pressure tests like you mentioned below. It's really odd that it seemed to pass the air test with a cut seal.
Also what might be a possibility is we tore the seal during installation, and the air pressure test we performed wasn't enough pressure to blow through the seal, but when it came time to run the trans the actual fluid pressure could have been much higher to break the seal completely. But either way, we broke it. lol

Like Poison Dart said the teflon vs. steel rings is a debate. Some claim they wear less on the drum and that I can see but at the same time I don't remember having to change more than 1 drum due to wear where the rings ride in 30 yrs of doing transmissions. All I have done in the past 30 yrs. until last year got the steel rings. When I installed my 408 I freshened up the trans and gave the teflon rings a try. Had no problems with them but at the same time I can't see anything they did to improve it. Lastly make sure your clutch plate clearance is adequate.
I talked to my local trans shop where I got my front pump from. He said I'll be just fine with the steel rings, so that's what I'll use. A few others I've talked to also agree to use the steel rings.

If the inside of the case looks clean I wouldn't worry about pulling the rest apart. I can't imagine you ran it enough to crud it all up. My opinion is you definitely found the problem, or at least one of the problems. The one that I wonder about is why is the front band burned up? That seal had nothing to do with it. Could it be possible you had it adjusted too tight? How many springs did you use in the front band servo?
Well, I ended up pulling the tail shaft just to clean everything. The rear band was just fine, as was everything else. There was friction material everywhere, so I cleaned everything up with kerosine.

Now about that front band, I also discussed with my local trans shop, he believes it was adjusted too tight, and this would cause it to take off in 2nd gear...-Which it did, -only sometimes.....I noticed sometimes I would have a 1 to 2 shift, and come to a stop and there would be no 2nd gear shift, like I was starting out in 2nd gear. And it did this a few times...But thats weird because I followed the specs in the ATSG service manual...It was something like 72 inch pounds then back it off 2.5 turns...The rear band was backed 4 turns from 72 inch pounds. In the "How to rebuild a 727" rebuild book it states for a trango shift kit with a 4.2 lever, (which I have a 4.2 lever) it needs to be backed off 2.25 turns from 72 inch pounds. The shift kit recommended tighten it snug with a short wrench and back it off 2 turns. The transGo 2 kit instructions werent real specific. What was also stated was, If I had less than a 4.0 lever, back it off 2.5 turns from 72 inch pounds, a 4.2 and 4.25 lever is 2.25 turns from 72 inch pounds and a 5.0 lever is 2 turns backed from 72 in. pounds. it if was unknown then back it off 2.25 turns. So with all these damn variables, what do you recommend, with my 4.2 lever??

Since traction has a lot to do with hearing a chirp when you shift it's kinda hard to say for sure but like I said I always block it with a loose converter. To get a neck snapping 3rd shift is a lot harder cause for one thing your going a lot faster when you hit 3rd and secondly the 2-3 shift requires perfect timing of the release of the front band and application of the direct clutch. Perfect timing is kinda hard to obtain cause several variables come into play. Unless your car doesn't get great traction and you have a torquey stroker I doubt you'll ever hear a 3rd gear chirp but a nice firm shift shouldn't be a problem. Blocking the accumulator generally only affects the 1-2 shift but I have a theory that it may improve the 2-3 shift a little as well. The reason I think it helps the 2-3 shift also is it lets the front band come off quicker. With a spring in the accumulator and the system pressurized the spring is compressed. When the pressure goes away (i.e. switching to 3rd) that spring will extent prolonging the time the front band is applied a little which can possibly cause 2-3 overlap. Overlap not only wears parts fast but it also robs hp. But there are variables that can blow my theory out of the water such as the application of the front clutch being slow. With that scenario you could have flare up (the opposite of overlap) and that'll soften your 2-3 shift but for the most part overlap is a much more common occurrence than flare up so that's why I block it. I have yet to have someone complain of any trans. I did shifting too firm.
I also mentioned this to my trans shop, and he said I shouldn't necessarily block it, but if I prefer to do so, he recommends putting in an even stiffer spring than what it came with. So either I'll have an accumulator with a really stiff spring or completely blocked...What are your thoughts on the stiffer spring idea?

thanks very much for your help this far! Whats a good clutch pack clearance you recommend? I only have 4 clutches in each drum.