Need Expert Advice on 2001 F150 Supercrew 4x4

[catsfan]

Our 2001 F150 Supercrew automatic 4X4 (60K miles) is costing us a fortune. Latest problem - It acted as if it wouldn't shift out of 1st gear and the rpm would ramp. We managed to get it to the dealership in 4wd at a snails pace (ran better in 4wd than 2wd). According to the Ford Dealearship we need a new transmission for a mere $1740.00 which doesn't include the $200.00 charge just to diagnose the problem. I asked if there were other options such as a rebuilt transmission? I was told it would cost more. Unfortunately, I don't know much about vehicles so I'm hoping someone can clue me in! What would cause the transmission to go out (60k miles)? How should I respond to the dealership? Do I authorize the replacement of the transmission? HELP!!