Transmission Problems

I'm havning a serious problem with the car now that Ive had it. The car seems to slip going into 3rd gear and slightly hesitates going into 4th. ive taken it to a mechanic and he gave me a diagnostic. He says that theres burnt fluid (god knows I didnt do this. The person who had it before me must have not cared enough for the car). He didnt drop the pan to see if there were any shavings in the pan.
When i am on the highway I cant go faster than 65/mph and it takes forever for the car to accelerate. I dont know what the cost might be to fix this sort of thing...any one have any estimates. I love this car and really dont want to get rid of it. I thought at first there was a linkage problem with the tranny but it sounds like it may be worse. I was thinking about flushing the old fluid out and putting new fluid in, but the mecanic said that it may aggrivate the transmission and may prevent it from working since the old fluid is thicker and the new fluid a lot thinner...any one have any estimates/suggestions?

As long as you pull the pan to clean out any debris then add fluid back it won't hurt, but I doubt it will help much. Those tranies are difficult & expensive to correctly rebuild.

yeah tell me about it....AAMCO says 1,500 minimum! I looked at him like he was crazy. But yeah Bosch..Thanks a lot for your help. So, the pan should be easy to pull, clean out etc...with using a basic jack? I was told a trick by using a small magnet to collect all the shavings (if any) at the bottom of the pan. Im wondering if that actually works.

There should be a magnet already in there to collect any metal. Just unbolt the pan & clean it off. While the pan is off look closely at the wiring harness, especially where it enters from outside. It is very common to have a wire break. You can use a multimeter to test each wire. VW actually sells the complete harness.