My gut feel, from a thousand miles away, is they machined something out of proper alignment. If you have two shafts operating in parallel, good things happen. Move them a little out of parallel and bad things start happening fast.
That is a likely explanation since 4th is "straight through". Input shaft connected directly to output shaft...
Also, they have sold hundreds(?) of these transmissions and they don't "all do that". So something is different about Matt's unit! This is not difficult to understand - although I cannot understand their refusal to investigate, let alone make it right. Especially for almost six large.
