I spent most of my time at Muncie this year closely watching wheel speed of all of the trucks. Most of the auto-equipped trucks were downright embarrassing to watch in the wheel speed department. It was clear to me why most serious pullers steer clear of the automatics. The auto's powerbrake and spin a little on take off, but as the weight comes up, the tire speed drops steadily.
If you download the available videos of even the best auto pullers, you'll see the same problem. Tire speed is 10 mph or less at the finish line (usually not near the 300' mark)
Shifting to third isn't going to help either. Your converter is too loose in fluid coupling. Your only choice to get serious wheel speed (and maintain it until the end) is to lock the converter clutch.
I don't see injectors in your signature so you probably don't have the power to pull 3rd gear with the converter locked. But 2nd gear, converter locked @ 3000 rpm will give you about 20 mph wheel speed all the way to the end. That will be a BIG improvement over what you have.
Not sure if your valvebody is set up to allow 2nd gear lockup or not, but that would be a cheaper option for you (and much more effective) than swapping to 4. 10 gears.
I've got to warn you. Many people have gone down the same road and locked their converters and broken parts. Loose converters tend to break input shafts and flex plates when they attempt to lockup during a sled pull.
Tight converters avoid this problem, but are harder to spoolup with large turbos.
I have no idea how tight or loose your converter is under power.
What is the true stall speed of your converter under full power? In gear @ FULL BOOST with the tires not moving? 2200? 2400?
My converter is fairly tight and I launch at 1800 RPM & 20 psi boost. At full boost, the stall speed is ever higher. It's more like 2400 RPM w/ 550 HP. What this means is that if my engine RPM is only 2400 RPM (near peak power) at the end of the sled pull, my tires can come to a complete stop. And it doesn't matter what gear you are in either because the input shaft is no longer turning or turning very slowly. That's why you HAVE to lock the converter to maintain wheel speed.
If you keep it in 4-Lo you have a very slim chance of hurting your output shaft.
I wouldn't hesitate to powerbrake the Dana 70 either. I'm still running a 70 and drag racing with a 1. 70 60 foot is much harder on the rear than spinning in the dirt.
I would powerbrake it to about 10 psi, let it shift into second and gain a few hundred RPM and then lock the converter.
I hope that answers your question.