The tranny (A998)is in a 89 dodge diplomat making a horrible grinding noise about 1 yr ago so I immediately parked it in my barn where its been sitting ever since.
I just dropped the pan and it was coated with about 1/8" light gray clay like substance. I am guessing its some sort of metallic byproduct of the 400hp 360 that its behind. The stuff coated the whole pan. I am sure its not good but do any of you tranny guys have any idea what it is. The tranny is going away to be rebuilt, but does the gray goo mean the internals are so shot that its not serviceable?

It's clutch facing or the friction material from the bands. It's normal to find some when servicing a transmission. The grinding sound could be something as simple as loose flex plate bolts. Or it could be something much worse.

Like bobby said, the gray substance is normal. It's just clutch material.

Could be something as simple as a thrust washer that ended up coming apart or it could be worse. Won't really know until you pull it apart.

Thanks guys, I've seen the metallic shreds before in other tranny's but never this clay like stuff before, maybe its just because it has sat for so long and the heavier particulates have worked there way down to the bottom.

Now here's the big question, should I replace the relatively new (30,000 mile) torque convertor as well? I am unfortunately thinking yes.

You will find the gray goo in most any auto trans that has sat for an extended period of time. Part of it is condensation, part of it is just dirt and clutch material, etc..

The converter should be sent out for service(PTC) or replaced,also that material in the pan is in the cooler and lines so you must take care of that as well or you'll be starting over in a short time.

I've sent several converters to PTC for freshening and they can adjust the stall as well. Kenny Ford is a mopar racer and treats his customers well. ptcrace.com

I can't remember, did marko keep the lockup tranny when he had that built up? the clutch material may be from the lorque converter lockup clutch. I'd look at getting the best lockup TC you can find, one with a kevlar clutch.....