As previously stated, the issue was the original transmission (Torqueflight 727) was mismatched to the Cummins. It wasn't so much that it couldn't handle the torque, but it was where it made the tork. In 1966 the 440 produced 350 hp at 4,400 rpm and 480 lbs. of torque at 2,800 rpm. That's considerably more than '98's 180 hp and 420 lbs. of tq @ 1,600 rpm. The key to the problem is the 2,800 vs 1,600 rpm. At the low rpm the cummins starts making power (1,200 rpm or lower) the transmission isn't tuning enough rpm to build line pressure to hold the clutches. So under heavy acceleration, even at stock power levels, the clutches slip, creating heat. The torque converter was also poorly matched for the low rpm torque and the stamped steel case would "balloon." Once it was figured out that bumping the low rpm line pressure and a properly matched torque converter would fix the issues, we were off to the races, literally. That's where the aftermarket comes in.
I have had my ATS transmission in since 2007 and it's still going strong. It has a billet input shaft, flex plate, and 5 disk tork converter. It has served me well, but probably overkill for most people.
At a minimum, I would upgrade the torque converter, boost the line pressure, and ditch the throttle position sensor.
As far as torque converter lockup, I have an ATS lockup commander which let's me select what mph it locks up. It also controls the exhaust break. A simple jumper puts it back to stock. It had worked great for me for years. For the price though, it's hard to beat the mystery switch.
I ditched my throttle position sensor (left in place though) and did the potentiometer mode for 4th gear shifts. This is one of the best mods I have done to date and it only cost a few bucks. No more hunting and I can bump 4th gear shifts up a bit while towing. The ONLY downside is that it doesn't downshift under acceleration, like if you wanted to pass someone on the highway. You just need to tap the OD button on the shifter. This is a non-issue since it never downshifted right to begin with and I found myself hitting the OD off button anyways.
I am not pushing ATS (I have a Suncoast GM solenoid) it's just what I have. There are several reputable companies out there. With all this said, when mine goes out again I may consider slapping a manual in, but that's just for fun. Hope my ramblings helped.