idle issues with new A500 behind a fresh 318

So I've been getting a new Dart on the road and have run into what seems to be a transmission issue. The engine is a newly built mildly modified 318 and the trans is an A500 4 speed automatic (based on the 904). I havent even hooked up the electrically triggered overdrive or lock-up converter yet. Just driving it around like a three speed 904. The engine will idle smoothly at 800 rpm. But if I leave it there it dies whenever I put it in Drive or Reverse. If I crank up the idle to 1200 rpm, when you put it in gear it pulls the rpms down to 600. That keeps it from crapping out when you put it in gear or coming up to a stop. On my other Dart with a 318 and a 904, it idles at 900 and when you put it in gear it drops to 700 - no drama involved.

I know this might be an engine tune issue and I keep working on that, but I'm starting to think it is the trans pulling the motor down too much. Any ideas???