2000 Olds. Alero Transmission Problems!

[bobbyhotel]

I'm new to this AF, and really in need of some help. I don't know if I'm asking too many questions here, or not. I guess when you sum it all up...its really a transmission problem. I'm just wondering what my steps would be in order to get it fixed correctly and with the least expense. Here is a condensed version of what has happened recently and if you can help me make my next steps it would be greatly appreciated.

2000 Oldsmobile Alero/6cyl.-3.4/68,000mi./Auto Trans. (No Dash Indicator Lights are on)

Oh Boy, where to start...
A while ago my girlfriends Alero was leaking coolant, so I had a friend who used to work for GM fix the lower intake gasket. Well...time between getting it fixed the car started to not shift past 2nd. and wouldn't go past 50mph. (RPM high) So I knew..transmition. My friend said he would look at it after he fixed the other problem. He said he couldn't figure it out (tried to manually shift, checked fuse's) and no longer had the equip to diagnos the problem, so he sent me to a company (AATCO Transmission) to find out whats wrong.
They did a test drive and called me today to tell me that they knew by driving it that it was an internal problem and they would have to take it apart to find out what was wrong. This would cost me $450, then if they re-built it they would deduct that from the overall cost. I asked if he did a comp. diagnostic check and he said there was no point.

My questions are as follows:
1. Was this the right process?
2. Should I still get a diagnostic test? (Cottman Trans. offers "free" check.)
3. Am I able to know what is wrong with trans. then be able to get it fixed?
4. Could it be a small problem ie: dirty filter, coil etc..or is it definitely in need of major repair?
5. Should I buy a re-built one myself? (friend can put it in for cheap)
6. We owe more than what its worth so if I get one myself...can I trust that it will last over 2yrs.?

Any suggestions would help, since I know nothing about cars. AAA won't tow it but one more time and don't have a lot of money to spend. I would like to thank anyone who will take the time to answer such a loaded question. If you need anymore info...please ask and I will do my best.