1998 Ford Contour LX 111,000 miles?Transmission Problem

This all started suddenly. I was pulling off from a red light and the car did not shift gears as normal. It seemed 1st gear held longer than normal, then it changed. The same day I experienced the same problem only then the O/D light came on & light started flashing continuously so I pulled over to review manual. It stated that there was a transaxle malfunction. Before I could get home to park the car, each time I stopped at red light the car would stay in first. I let off the gas and it would change gears. Parked the car immediately -left running and checked fluid. Level was where it was supposed to be. Mechanic scanned - no codes regarding the transaxle? Stated power steering code of some sort. He says the fluid has a burnt smell to it and when he dropped the pan to check for metal says very little was in the pan & no large pieces. The car has 111,000 miles - transmission was serviced at 50,000 and timing belt chain replaced last summer. The Check engine light was staying on and when the belt was changed I think it was said the OM sensor was bad - told not critical could wait since it would be in addition to the $800.00 on the timing chain.

Recent Mechanic says fluid was like varnish in color- odor and smelled burnt. Has given me price for new and used transmission plus labour but I want to check and see if anything else could have caused this. No warning and parked right away. Thought about screen but its inside. He had said if he removed pan and found metal no need in servicing. But very little metal and going on smell and color of fluid to replace trans. Says no one will know until its taken apart where we are at. Just need advice or expert opinion before I make a decision. I was going to take somewhere else but no need in double dipping for the scan. I read on here that scan should be done in motion? Anything will be helpful!
The mechanic is a dealership mechanic - just not a specialist on transmissions. I have read forums on different areas on the net and there is so many different topics and all this computer stuff could cause this too? I first told the gentleman to just put the pan back on pick up a seal add me some fluid - let me check it or get another scan, but why waste a $28.00 gasket / seal. But it would be several hundred dollars to replace. The used one is guaranteed for a year with 112,000 miles on it and the other with a 3 yr for the new. Any advice would be much appreciated.
Thank you, Lady in need :roll: