tranny advice please. Flush or replace?

I have a jeep cherokee four wheel drive with 150k miles on it. It has an automatic transmission. Recently it started to hesitate when it needs to shift gears. If I let up on the accelerator a little and reaccelerate it will finish the shifting OK.
I took it to a shop today and they said that I needed a new transmission ($2,500). They said that the other option was to do a transmission service which included a flush, but that they wouldn't recommend it. The reason they didn't want to do it is because they said that occasionaly on high mileage cars a tranny flush can lock up the transmission. They said that the flush can potentially get rid of the things that are now holding the transmission together and once those things are dislodged the transmission won't work anymore. They said that the flush could possibly help the problem, but like I said they didn't really seem to want to do it. They also told me that that the existing fluid was dark and smelled a little burnt.
I can't tell if they're giving me valid advice or just trying to sell an expensive repair. It seemed like a reputable garage, but I've just never heard of this before.
Should I disregard their advice and try the tranny flush and service? If it comes down to a $2500 repair I will just get rid of the car! The car runs perfectly otherwise, so it would be a shame.

The flush is a waste of $$$$$,,,,fluid & filter change better idea,,,,,if it's slipping ect,,ect,,,ect,,, best way would be to use the money to repair.......
may want to shop around ,,,the price to repair can vary by hundreds of dollars.....My jeep GC has 243,000 miles,,,2nd trans,,,water pump,,,,rad,,,
fuel pump,,,alternator,,,,still cheaper than a car payment,,,with the price of gas,,,better look at flex-fuel types too!!!!!!!!

Did you check the fluid yourself? Dont take their word. I would drop the pan and check if the fluid is burnt and dark before believing any shop. At least pull the dip stick and look at it. The fluid should be a bright red and tranny fluid stinks even if its not burnt, but if it is, it will have a definate burnt smell. They are right about flushing a high mileage tranny. It can break loose contaminates within the tranny and clog passages and valves causing more problems.
I would buy a case of fresh Mercon/Dexron, drop the pan and change the fluid, take it for a short drive and repeat until the fluid remains bright red. Change the filter on the last fluid change. This may take three or four times but the more you do it, the cleaner the fluid will be. Once you get the burnt fluid out, you can tell if the tranny actually needs a rebuild or not.
Dont just jump right in for a $2500 tranny replacement either. Thats pretty high and besides, most shifting issues with the AW4 tranny can be tracked to sensors and dont require a rebuild or replacement.

Sounds like its not building up enough pressur to complete shift.Try some LUCAS TRANSMISSION FIX I have had lots of luck with it. Just pour it in while truck is warmed up and running. If one dont work try two. If it helps sell the jeep. Also once its added let the truck warm up in the mornings before you go.