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Not every transmission allows you to select every gear. You just can't force the transmission into 2nd gear.
O - Allows all 4 gears to be used
D - Allows up to 3rd gear
1 - 1st gear only
If you have a tach, you can tell when it shifts gears by watching the RPM's change.
Part of the reason you can't select every gear is Ford used the same steering column for all it's automatics. The C-4/6 transmissions only have 6 detents and to make the AOD compatible it can't select 1st or 2nd gear (depends on model). The other nice thing is you can put an AOD in an older car and retain the stock column yet have overdrive.
All Ford's older automatics have the same 1.00:1 ratio in 3rd gear. Just with the AOD it has a partial lockup in 3rd gear so it will run at a slightly lower rpm. The C-4/6 transmissions will run approx 300 rpm higher than a manual transmission in direct gear and the AOD will run about in the middle of the two.
With the newer automatics the computer can command a lockup in any transmission gear by controlling the clutch. This is why the newer vehicles can get the same highway mileage as a manual transmission version.
The AOD doesn't have a typical lockup converter as one of the main input shafts is splined directly to the front of the torque converter where as the modern transmissions use a clutch lockup.
Its tough for sure. I know there is ford trannies with OD that are supposed to be just as tough. Some guys say the Aod, some guys say the E4od (might have the name wrong).