I have to agree with 5.0 in a 66.
Does the transmission slip while shifting between gears? Does the RPM or engine rev up at all between gear changes while your going down the road?
The only way the transmission fluid is going to get almost black and smell like is burnt (the fluid on the dipstick, smell that. NOT the odder your smelling while the engine is running) is if the clutch packs are slipping and/or its been over heated really bad.
I wonder if this slamming your hearing while going into reverse and drive is a broken motor mount, transmission mount, a universal joint, or even something as simple as the idle being adjusted to high causing it to clunk while coming out of park and into a gear. Check that stuff out to before you tear out the transmission.
Get someone to help you check the engine mounts. Have the car running with the hood open. Have someone stand next to the car (not in front of). While you hold the brake pedal down, put it into drive and gently give it some gas. If you see the motor climb upwards on one side you have a broken mount. Do the same thing with reverse gear. The pressure will be on the opposite mount. Turn off the car now. You will have to crawl under the car to check the u joints, and
trans mount. Try to wiggle or twist the joints. Use something to give yourself some leverage if you have to. You shouldn't have any movement.
The car should idle around 700rpms while in gear and the brakes being applied. Much higher and you can start having problems.
How does the transmission act while going down the road just driving it normally? Under full throttle through a couple shifts?
Don't tear the transmission out yet! Get the leaks taken care of first. You might as well replace the filter since you are going to have the pan off it.
Let us know what you find out.
I can find you the exact specs for adjusting the bands in the
trans, and the kick down linkage. If you need it
Help with 1966 ford mustang automatic transmission 
$100 form summit racing
The problem that we're having with the transmission is that it's leaking a ton of fluid from underneath from the pan so we've gotten a new rubber gasket to fit around the pan, but we haven't installed it yet. As far as the fluid burning when we check the fluid it's really dark almost black and we can smell it burning when the car is running. This may be from it leaking underneath the car. I am by no means a mechanic so we're just trying to find out what may be going on with the tranny before we rip it out and rebuild it. It has shifted hard since we've had the car, mainly in reverse and putting it into drive makes the transmission slam likes it's really tight and it's having a hard time shifting. So if anyone has any advice I'd love to hear from you. Thanks so much.
