I had the same problem and fixed it yesterday. I just got my 727 back from being rebuilt and I bought a used housing and gear which came with a new O ring and internal seal which was missing from the transmission. The housing came with a new seal and O-ring and it leaked and ran down the cable. Yesterday I pulled the housing back out and noticed there was no resistance when pushing the gear into the seal so I replaced it with the one the trans shop sent with me out of the rebuild kit. Now I could feel the seal againts the gear and the leak is gone. Some one must be making a seal with the wrong dimensions .