UPDATE:
My last post stated that I test drove the tranny and it tested fine even through several WOT runs. Well, a couple of weeks went by and I pulled the car out of the garage and then tried to bring it back in and it was slipping again. Then once I got it into the garage and I shut it down, I tried to roll it forward and it locked up again in N. Then like last time, once I rolled it backwards about a foot and then rolled it forward again, it moved freely in N.
I decided to email Rick Allison at A&A (He is local to me and I already have some of his parts in this tranny) and after giving Rick all of the details that I posted above and then the additional info of what happened over the weekend, Rick too ( like above mentioned) thinks that the sprag may be damaged causing the binding in N. But Rick also thinks that the slipping (I also have a vibration during cold startup in N) may be my eight year old converter too. I have decided to pull the tranny and let Rick go through it and determine all of the issues. It will be a few weeks before I get a chance to pull it but once he has gone thru it, I will post the damage results.
Rick sells the sprag upgrades and he has already quoted me a 9-1/2" converter back in the Spring. Depending on the cost of this, I might consider one of his valve bodies too.

It appears that I have a Winter project!