Those were my same problems with my first bad trans in '85. No reverse and 3rd gear in my 904. After getting a couple of quotes, I pulled it and fixed it myself. The problem; my direct clutch had a bad piston seal in it. Very easy to fix if you want to try it yourself. It took me 2 times since I just changed the clutches and didn't have a special spring compressor to remove the locking ring. I made a tool to get it done on the second try.
Buy a gasket, seal, clutch and steels kit and we'll walk you through it. You can flush your converter with kerosene or diesel fuel if it has a drain plug. You can take the trans case to a quarter car wash and flush out the all of the shavings for about $1.50. You'll save a bunch of money and learn a little about trannies.
Rob
EDIT: I read your thread again and notice that they already have your tranny apart. I got a quote of $1200 in '85 to rebuild a 904 from AAMCO. If they are getting you a NEW converter, and replacing all of the clutches, steels, bushings and seals, then $1500 to R & R your trans is the least you can pay for someone to do that, if you can't do it yourself. And that comes with a warranty, right?