Thanks to all of you for the responses. I will check them all out. One more question. My car is a 2WD version. Does this affect transfer case & this situation at all? Pardon my lack of knowledge here. A couple of the responses indicate how to change the gasket, which sound perfect, but 'racsan' indicates the gasket between transfer case and transmission is not even sealing fluid between those parts--if I am reading it right. If that's true, doesn't that mean there's a different problem? If someone can comment on that issue it would be great.

FYI... i went to Autozone before anyone responded and the guy there told me there is no gasket between those surfaces--even though I clearly see remnants of one--or at least some type of RTV around it. Now I have the actual Ford PN thanks to "Rockledge" so that's something concrete. I'll dig further in my Haynes manual.

Also, I'll check out the shift rail plugs and look for other signs as well, and get back to you. It may take me a couple of days as my car has been garaged now for over a month as I've replaced H20 pump, thermostat, timing belt, plug wires, plugs, etc. My wife may divorce me if I don't give her use of the garage this week, now that it's getting cold--and as since I've promised it over and over! Stay tuned and thanks again!

Gary