If you ever see a diff pin protruding from where it should be, the diff is JUNK period!!

If you have reverse, you know that the you have a solid connection between the 2nd clutch drum and the front planetary. So if you have a good 1st gear and it goes to neutral when it is supposed to upshift into 2nd, the valve body is making the 1-2 upshift. So either 1-your 2nd clutch is not holding, 2-you have a problem with the 2nd clutch hub on your input housing or 3-you have no oil going to the 2nd clutch.

OK, I checked the oil pressure and I had 54 psi, so I'm going to swap out a new clutch pack then.

Make to to verify that your repair will actually fix the trans before you put it back in the car.

How would I do that?

Do all your air checks and make sure that everything mechanically is OK. Just go over everything that I outlined. You definitely have a mechanical issue. Make sure that you find the cause of the problem.

Looking over that diff a bit closer, ya, I think this may have been the start of the problem.

If you had pulled that diff. You would have noticed the gears/pin being floppy etc. I've been there, but pulled the diff and said "this doesn't look good".

I have also found that same bearing to look like that.