[Bill Harris]

Sounds like you still have a valve body issue. Your analysis is correct that all of the elements are working to some degree. However, you could have reverse and still not have third even though it is the direct (aka high) clutch that is engaged for both. Most valve bodies have a much higher line pressure for reverse than for the forward gears, and the load is less in reverse too (highest numerical gear ratio), so it might have enough engagement to make reverse work, but not third where the load is highest (lowest numerical gear ratio). The direct might be trying to engage but not have enough pressure to hold in third.

Another thing that is troubling is where you say "sometimes it freewheel's in low on decel." Whether it freewheels in low on decel is completely a function of the valve body design. If the valve body applies the reverse band in low then it will have engine braking in low (this puts less stress on the sprag). If the valve body doesn't apply the reverse band in low, then it will freewheel on decel in low as the sprag is overridden. If you sometimes have freewheel and sometimes not, that is another indication that there is something amiss in the valve body. It should always free-wheel or never.

Whether you need the spring and plug that is held in by the filter is also a function of the valve body design. I think most fully manual valve bodies do not need the spring and plug, but yours might. If it was in there originally, you should put it back.

You should make absolutely sure that the shifter is adjusted properly too. Most full-manual valve bodies use the manual valve as the only fluid directing element, and if it is not positioned right you can get all sorts of weird results.