Rebuilt 904 w/ tf2 shifting woes...

I have a 340 w/ XE268H cam, 3.23 gears and sure grip.
The tc is 2500 because well 200 to rebuild it vs 5-600 to buy a new one was what would keep the wife from not killing me. Also most companies I called suggested around a 2500 tc.

Is your 340 the hi-compression version?
At what elevation? ; Wiki says ~2000ft

At 2000 ft elevation, 10/1 Scr is barely enough to make 160psi, and the torque from 2500 to close to 3500,will feel a little stronger than a 5.2Magnum at sealevel, before it wakes up.
If you have aluminum heads, then you can push that pressure to 180psi @11/1 Scr, and with a tight-Quench, still run on 87E10. That will most definitely spill the coffee, on the 1-2 shift, even with the 3.23s

The point I'm trying to make is that to bark the tires takes power. If your engine is lazy, so will the trans be.

In my 367, at one time,I ran an almost identical Hughes HE2430AL. At 10.7 Scr, at 930 ft, it was a torque monster with 3.55s and a clutch. The pressure was pushing/over 180psi. She barked the 295s going into third gear at over 80mph. Even with 4 hefty boys in the car. She would break those 295s loose at over 50 mph in second gear (just me in the car). 3.55s and a clutch, in first gear, has about the same torque multiplication as a 3.23 automatic, also in first gear after the stall.This is not a brag, this is just for comparison's sake.