This is EXACTLY what mine is doing. ('97 S10 pickup, 2.2, 4L60e) It wont downshift when you try to accelerate, just revs in neutral... and it wont shift back into 1st when you come to a stop, just revs in neutral. It still has all 4 foward gears as well as reverse. They dont seem to be slipping either, and shifts are firm when you shift it manually.
Well I'll tell you right now, Ive had my truck scanned by 3 different people with everything from an actron OBDII scanner to a snap on diagnostic computer that could look in the TCM and see all sorts of parameters. Both trans shops that I have taken it to said that it sounds like its a broken sprag (sorta like a one way clutch... think about whats on the back axle of a 10 speed bike that clicks and allows power transfer in one direction). They both said they dont think its an electrical solenoid or switch or anything computer related.
After a while, my 3-4 shift started feeling soft, but it also revs in neutral as if i shifted it too early or something. I cant tell if its slipping clutches or just the same problem we've both described.
My issue started one day where it revved in neutral on an upshift, and then it was fine for a little while. Then it did it again and started getting more and more frequent. It would do it when it was cold and then it would be OK.
My next step is to drop the pan and see if there is any metal in there. If there is, I know the mechanics were right.
Im also pretty sure I have a trans fluid leak somewhere.
If you get any answers on this, PLEASE let me know!!
Im planning on buying a Jasper reman with a 3 yr/100k mi warranty with my next paycheck
They retail at 1700. The lats AAMCO "rebulid" on this trans cost the previous owner 1800 and it lasted a whole 28k miles...18 months, just out of warranty by 6.