95 SL-1 Engine/Tranny Problem???

I have a 95 sl1 automatic with 155k miles on it. I was driving today and I noticed a funny burning smell... kind of like burning rubber, but not quite. It kind of had a sort of a burning hot metal smell to it, it that makes sense. I had been driving for a while and the engine was hot. the RPMs dropped very low when I came to a stop. the temp gauge went up over the halfway point. It started shifting gears erratically and the SES light came on. I pulled over to check it out. Tranny fluid was good, oil level good, belt seemed to be in ok shape. I couldn't see any obvious problems. I read the engine codes and I got a tranny code 23 (no 3rd gear.)

It may have been my imagination, but it seemed to me that I had to brake much harder to get the car to stop and that the steering was looser. I also go a nasty lurch from the change in gear when I slowed to make a stop.

I had previously noticed recently that the RPMs always seemed much lower than they should be while idle, especially when the engine was warm.

I have also gotten the same tranny code several times before.

Any ideas what the problem could be?

My very first guess would be to check the thermostat. That may be causing overheating which would in turn cause other problems.