My jeep is shifting hard into thrid gear and makes a clunking noise as it is doing it. I recently took it to a transmission shop for help, however they want me to pay for a complete transmission rebuild. Does anyone out there know what I should do, or what the problem could be?

That sounds like a hard core problem. If you, or the previous owner, never changed the transmisison fluid that may be causing the problem. But if it making the nosies you describe the damage is done and you should probibly have it replaced like they say. You can flush the system and see if that makes a difference but you may be just kicking a dead horse.

Not positive but usually the first thing I would check on is to see if that particular transmission has a modulator valve. If it does then check the vacuum lines going to it and/or replace it. Most transmissions that shift hard are due to a failing vacuum line to the modulator valve or the valve itself. Some trannys do not have these or if they do they are internal. Also maybe try tightening the bands up a little. These are a few things I would try doing before spending big bucks getting a tranny rebuilt, what do you really have to lose if the tranny is bad anyway. Do different things to it to see if that may help and if not then consider getting it rebuilt or a used one from a junk yard(rebuilt would be the way I would go, unless you get a good warranty from the junk yard).