I've never seen a pliable lip seal fail to do it's job unless it was cut or had begun to disintegrate. Even the ones that were rock hard would start to work after they warmed up. If the trans is still in the vehicle I wouldn't remove it. Did you check the governor valve on the tailshaft? Would the valve flop downward on both sides when you turned the shaft?
the seals are not torn or cracked, they look good to be honest, the transmission is out and apart on a work table in my garage, been out for a few days, the governor moves like it should when rotating the output shaft
