you think that no shavings went in to the trans? What is the converter pump right from the pan? come on guys..... if there is junk in the pan that junk went in to the pump and the converter first. You can sure just put a converter in and flush the snot out of it and change the filter, but for sure parts hit the pump and other internal parts. The 100% correct way would be to rebuild the trans, insuring that its not going to fail and leave you on the side of the road. The Westech way would be to slam in a new converter.... just dont diss the guy for doing it the correct way.
After working in different trans shops for a decade, then opening up my own, I have to agree there are some real rip-off artists out there. I have found being absolutely honest does all the advertising I ever needed. Anyway, the fluid from the pan does enter the pump first, but it is filtered, so any shavings from your TC will be filtered out. That is not to say I would agree to just replace the TC. I would rebuild everything while it is out. Also, I would pay to have the cooler flushed with hot trannsmission fluid as I have seen the difference between this and cold mineral spirits, which will do fine if the cooler lines are not filled with muck, but more than likely, the TC was cooked and the fluid has turned to pudding in all the tight areas.
Put it this way: Are you going to be as happy with the same trans behind a new TC, or a completely rebuilt trans behind a new TC? If you can turn a wrench, rebuild the trans yourself. TH400s are the easist trans on the planet to rebuild - even easier than the TH350, or 3L60, as the pros call 'em (The TH400 is the 3L80, and it's overdrive cousin is the famous 4L80E)
Anyway, if you buy the ATSG manual off ebay, it will show you how to do everything to the trans, including diagnosing.