I just went through the same thing. Went to a local salvage yard, got a replacement(paid $600 for trans.) This is a 4x4 btw, so it's a pretty big job. Swapped out the trans. put everything back in, and it would only go from Drive to 2nd, then flare trying to go to 3rd.
I double checked everything, then finally pulled the pan and found pieces of metal and needle bearings in the pan and on the magnet. I called the salvage yard and they said to bring it back and they would swap it out for another. So I pulled it all out again, took it back, swapped it out. Installed the 2nd replacement in as many weeks, but this one was good and works better than the original.
When I swapped the 1st one out for the 2nd one I made them pull the pan so I could check for metal and see if the valve body gasket was blown, everything looked good and it all worked out. So anytime you get a used trans be sure to do all the checks possible before you take it home. If there's not metal in the pan, the VB gasket is good, no burnt smell, and the fluid is fairly good chances are better it's a good trans.
I got mine from a more reputable yard, and I've never had any problem with any other parts I've gotten from them. They had no issues with exchanging this one, so all's well that ends well.
