Yes and it's all on here
:JP:First of all you should scan it with a scanner that reads the Ford transmission codes. It sounds like a VERY common issue though.
It is likely due to TCC or EPC solenoid valves. They will cause too much converter slip and trigger the flashing o/d light and usually put it into limp home mode. It is also often due to a blown valve body separator plate gasket, which would be done at the same time anyway. They have since made the separator plate with a bonded gasket but it originally came with a two piece gasket and separator plate, which blew out. It was so common that Ford released a TSB on the issue. It also causes 2-3 shift flare, which is a quick identifier of the problem.
The 5R55e are also prone to solenoid and sticky valve issues (TCC, EPC etc), which are addressed best with the respective solenoid or valve body rebuild kits (sonax/transgo). It will provide more precise shifting when done too. You can do the separator gasket if you are fairly handy, patient and careful, but it is not usually time for a new transmission yet. You can also buy complete valve bodies online, that already have kits installed, and you'll have a practically new running trans for a few hundred bucks and a case of beer in your garage, more info in the links at the bottom.
As for flashing o/d light and the transmission clunking into gear, it is in Limp Home Mode (LHM) many Fords are programmed to do this as a precaution to help prevent further transmission damage and slipping. If you reset the system with a scanner or remove the negative battery cable for a few minutes, it will reset and go into normal shift mode again. As soon as the error triggers again, it will retun to LHM and the o/d light will flash.
Here's more VERY detailed info on the fix by the best Ford transmission guru's Glacier991 and BrooklynBay . These guys know more about Ford transmissions than anyone I ever met when working with Ford. If you can't follow thier step by step pictorials, you might want to have someone else do the work for you.
Brooklyn Bay's list of useful threads:
http://www.explorerforum.com/forums/showpost.php?p=1439158&postcount=17
Glacier's full rebuild diaries
5r55e rebuild diary:
http://www.explorerforum.com/forums/showthread.php?t=14098
A4LD rebuild diary:
http://www.explorerforum.com/forums/showthread.php?t=137972
More info on your most likely problem:
http://www.explorerforum.com/forums/showthread.php?t=174202&highlight=2-3+flare
Just about any info you can possibly dream of is on here from Glacier991 or BrooklynBay. Happy hunting.