sounds like the transmission's fried. Overdrive is usually the first thing to go on the A4LD
tranny that Ford put behind the 2.3 in these cars, it's the weakest of several weak links in these badly designed transmissions. Best bet (if you've got the time, money, mechanical aptitude, and abilitity to drive it) is to swap to a stickshift, barring that, have the transmission built by a shop that specializes in performance transmissions and have them do everything they can to beef it up (better internals, a shift kit if available, etc.)
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1976 Ford Mustang II Ghia: 302 with a 600cfm Edelbrock carb, Edelbrock Performer 289 intake, Dynomax Blackjack headers, 2.5" exhaust with Flowmaster Super 44s. RJS 11-gallon fuel cell, C4
tranny, chrome 16" pony wheels, fuzzy dice, brown vinyl half-top, and painted in the tackiest color ever (harvest gold, that's why I call it "The Goldenrod").
Also have a 2003 Dodge Ram (lightly modded daily driver/tow rig/office/dining room/home away from home/workshop... I call it "The Big Blue Dawg".)