jeep 904 auto issues anyone want to take a crack at this please

And I'm pretty sure it's a 904. When I got it and changed the filter and pan gasket I took them to the parts store. "A reputable one". And matched up the gasket and filter to a 904 which is what it also stated in his book.. What would be any difference in the other ones? I think I'll unhook the shifter at the trans and have my buddy manually put it in low to see if it still does it, that would rule out the mechanical part correct?

904, 998, and 999 all use the same filter and gasket and look identical in nearly every aspect. It's just that the 998 and 999 can be a lockup and have a lower gearset internally and hold more clutch plates.

IMO it's either a broken spring on the 1-2 shift valve (in the valve body), a governor problem, or very likely broken/leaking accumulator ring(s) like A/J mentioned. The only reason I can think that it'd start in second in drive and drag when you put it in manual low is a issue with the accumulator circuit leaking and applying the front band. Unhooking the shifter will not rule out anything cause a mechanical problem will be inside the trans.