The functionality of the lockup on the 700R is IMHO marginal ay best.
Take for example, the 4L80, now this trans shifts through the 1-2 the 2-3 and the 3-4 shifts then at or slightly above 45 MPH with light throttle the TCC locks up.
This is a perfect calibration of the thing.
The lockup clutch was never meant to be engaged at low speeds.
The whole concept of the TCC is to eliminate the small amount of slippage present in the converter during "Cruise" operations.
The TCC was designed to help with mileage out on the highway, nothing more.
The construction of the TCC is pretty sketchy at best.
Inside the front of the converter housing is a cup shaped disc that fits in close proximity to the converter housing, such that it affords a fair seal between the Disc assembly and the converter housing.
The clutch disc assembly is splined to the input shaft of the transmission.
The disc has a pair of friction material areas on the front facing surface of its "Disc" one near the perifery that is about an inch wide that runs the entire diameter. The other "ring" of friction material is near the hub area in the center.
During operation "Takeoff" the supply of fluid to the converter is fed through a passage in the input shaft that directs the flow to the front of the "clutch disc" and it keeps converter full of fluid and also keeps the clutch "disengaged".
Once road speed has been reached and the converter has been commanded to "LOCKUP" Either a series of hydraulic valves and or an electric solenoid (Or both depending on the year model of the 700) redirect the fluid flow in the converter to the area just behind the clutch disc unit.
With the fluid now flowing behind the clutch assembly it casues the whole unit to move slightly forward and allows the 2 friction rings to grab the front of the converter case this locking the converter into a solid unit that eliminates all hydraulic slippage.
Sounds cool eh ???
Well the principal is very basic but the contruction of the clutch is not designed to take a great deal of load.
This is the reason that it is not recommended to use the OD setting when towing.
The OD places a lot more torque requirements on the converter clutch to keep the vehicle moving.
During hard pulling the tiny areas of clutch lining can start to slip some. As slippage continues over time the clutch lining wears and in some cases the slippage is enough that the lining burns and goes away entirely.
Once the lining is gone the clutch plate while trying to engage the converter housing instead just spins away "metal to metal" and chews up the inside of the converter.
"GAME OVER"
If the tranny will hold "lockup" while it is relatively cool but as things reach full temperature starts to bump or slip and then fails to hold at all, you are seeing clutch failure.
(Cool oil is thicker and the pressures are slightly higher affording a little more holding power on a failing clutch)
The practice of wiring up or otherwise making the TCC work in the lower gears is a bad choice on one of these transmissions. The clutch was never meant to handle this type of useage and will fail fairly quickly.
Using the TCC for engine braking, although handy, is also a bad idea.
The same issue comes up, the clutch is being asked to do what it was never designed to do.
THE AFTERMARKET tranny boys do offer converters that have much stronger clutches.
Many of the replacement converters for the 4L80 and the large Ford trannies, Dodge too can be ordered with "Multiple disc or HD Kevlar" clutches that can withstand far more abuse than the stock clutch.
Most clutch lining in these things is a "Paper material" that is treated and bonded to the steel clutch plates.
Once soaked in oil it becomes a very good friction agent, up until is slips and then "BURNS" once burnt it turns to carbon and the game is over.
Semi metalic clutch frictions are used in some areas of the transmission depending on the torque load requirments.
The converter in the 700R is very small and when you add the clutch assembly the internal area for the pump, turbine and the stator become even smaller.
The 700R converter as it is stock simply is a very poor excuse and is prone to failure when used in rough service.
Removal of the pan and a peek at whats in the bottom will in most cases reveal if a TCC has failed do to wear.
A worn out TCC will leave lots of metal flakes as well as ground up clutch lining (Dark flakey stuff) in the bottom of the pan.
Moral of the story, the 700R converter is best used as it was designed and allowed to only engage above 45 MPH and then only in 4th gear.
Yes yes yes, I know, many of the 700's will engage lockup at or around 30 MPH in town and loaf along, chug chug chug.
Not a good idea at all.
The later 700R, The 4L60E has all this crap handled. The clutch comes in after 45 MPH (In most cases) and will not allow for the low speed use of the TCC.
If you want to use the TCC for low speed and or compression braking, spend the $$$$$$$$$$$$$$$$$$$$$$$$$ and get a converter built that can handle that task.
OH Plan on some serious Bucks too $$$$$$$$$$$.
Another thing you need to be aware of.
The input shaft in the 700R is a piece of swiss cheese, it has more holes and passages that a coal mine in Virginia does.
This effectively weakens the little critter a BUNCH (late 700 stuff "after 86" are BETTER)
Now this said, there is another sand trap in these things too.
The input clutch drum is made of ALUMINUM and the input shaft is just pressed into the splines in the drum.
Using a low engagement TCC allows a lot more forces to be placed on the aluminum splines (Low speed power pulses and vibrations)
The splines loosen over time and then shear off. "game over"
A hardened steel ring is available to press over the splined hub in the drum. This device stops the hub from expanding under abuse and will "HELP" keep things alive in there.
All in all, the 700R is a light duty gear box. Sure it can handle a fair amount of work but you had better plan on spending some serious $$$$$$$$$$$ if you want to make the thing reliable.
IMHO the 700R is not nearly as strong as the TH350 is in stock form.
A TH350 with a simple shift kit can stand some seriouis abuse and live.
Now the venerable old TH400 is a TANK. A shift kit and cooler is all it takes for one of these in stock form to handle some real serious thrashing.
Back to your 700R TCC issues.
Yank the pan and see whats lurking in the bottom. If its full of lots of crap, the clutch is likely gone on to greener pastures.
If clean then check the supply of power (12V) to the wires feeding the clutch control solenoid.
At road speed there should be power to the solenoid.
There are at least 16 yesssss sixteen different wiring types for the 700R TCC setup.
If the rig is stock and has not been messed with then it may be an electronics issue.
Now if the clutch will hold when the tranny is "cool" then the issue is the clutch as I mentioned before.
Hope this tutorial on the 700 helps some.
MGW