727 Problem

Have you drove it? Does it shift into 3rd when driving it? If not my guess would be the inner lip seal in the direct drum is allowing fluid past it. Most kits you buy nowadays have a thicker direct drum lip seal as the factory one was on the small side but, this seal is usually in a seperate bag in the kit. If you were not aware what it was for you could have put the factory size back in it and, with the added line pressure from the shift kit it may be blowing fluid past that seal. That clutch pack is applied during reverse and 3rd gear so, if 3rd gear is also flakey then I would point towards that.
If third gear is fine then check the accumulator piston and seal for the reverse band. You can air test this with the valve body out. The accumulator piston could be cracked or the seal around it could be bad.
Of the oil is that burnt already i would lean towards the direct drum lip seal.