727 sometimes not going in reverse

IIRC you said the oil level was correct. Now I'm wondering if the dipstick is the correct one. Before I would take off the pan, I would "overfill" the pan. a half a qt atta time to maybe 1.5qts total, and see what happens.
Just maybe the pump is sucking air, as the jumpy needle seems to indicate.
However, with full hydraulic pressure in the rear servo, and with third gear(Drive) working,The only other conclusions I can come to are 1) There is something wrong with the band or its struts, or2) the planetary splines are stripped out. But since low works,and reverse sometimes works, I'd have to think the splines are ok.

Just hang on for a bit, maybe someone else will chime in.