'99 Outback tranny clicking

[MalibuBob]

While my '99 Outback (around 95K miles) was at the shop today getting the engine coolant changed and tires rotated, the mechanic discovered what he says is a problem with the transmission. He said that when he came to a stop while test driving it, it felt as though the rear end wanted to "keep going". When he put it on the lift to rotate the tires he heard some clicking sounds coming from the tranny while spinning the left front wheel. It was on the lift while I was there and heard it myself. It is NOT coming from the CV joint, but inside the tranny itself. He says he also thought the tranny fluid smelled burnt.
It is my wifes car, so I hardly ever drive it, so a change in driveability would not get my attention.
He says we need to rebuild the tranny, to the tune of around $2K. I've been using this shop for almost 20 years and they're VERY good. They don't recommend work that does not need to be done, so I have no doubt that we have a problem.
I guess I'm looking for any similar experiences, and if any one has any thoughts on the diagnosis. I imagine that once the tranny comes out, it might as well be re-built. My wife does want to keep the car for another 50K miles.
Thanks!