I think you're right , burnt parts are not good .. I'm curious why the forwards would burn . If the line pressure is good , the forwards never do any work . Mostly they come out looking new .
That pic is actually one of my own valvebodies . It was an experiment I did for auto shifts behind a stroker big block..
The transgo drill is .110" That is usually plenty. I have done some to .125" but in your case all that will really do is firm the 2-3 shift.
The other hole that is drilled that transgo don't drill is a feed for the 2-3 shift valve through the 2-3 backout valve. But in that case I have blocked the 2-3 backout totally
The transgo kit that is still functional
I'm running out of ideas
I take it line pressure as you say is ok? Have you driven with a pressure gauge on it ? Does it have good line pressure rise as you accelerate and vacuum drops ? The modulator and valve and pin are all functional? Good vacuum ?
Even at idle , check pressure , then disconnect the vacuum totally, line pressure should jump up ?
The 1-2 + 2-3 shifts feel ok normal driving ?