Since it still grips tight when in drive, I would suspect that the body of
the trans is still good, or good enough. The valve body directs the
shifting, and this seems to be a shifting problem.

 The valve body is the lowest point on the transmission, and may be starved
first. Just my guess. If all the fluid is needed for circulation in the
transmission, leaving the valve body starved.I dont know the circulation
pattern for the fluid, but this seems possible to me. When the fluid is
foamy from overfill the Vanagon trans wont shift, and slips. Foamy acts like
low fluid. Trans will slip and reengage over and over as liquid and foamy
fluid is supplied to the tramsnission at different times.

Valve body  swap is EZ. Done it several times before. There are no rubber
pieces inside the valve body. Only aluminum and steel. I understand that the
pistons can get scored. Bentley shows a good exploded view. I found a valve
body from a Audi 5000 in my 85. Messages here in the vanagonlist  archives
show where I made this discovery,I think. I think several  different valve
body swaps from other VW cars are possible, but shift points may be  a
little bit changed.

Good luck