That band is only applied in reverse unless you have a low band apply valve body. Even if it was low band apply it's only helping hold the drum along with the low roller clutch. Therefor it should slip. Did you check the adjustment before disassembly? Possibly to tight. It looks to me like it's been dragging in other gears. Is it a stock servo? Does the servo piston show any signs of being cocked in the bore? I suppose there could be an internal bleed in the valve body. To late now but you could check for pressure at the rear servo in N, 3rd, 2nd. It should read 0 in those selections. If it's non low band apply it should read 0 in 1st as well. any pressure in those selection would show a cross feed.
Doug