BlueJay,
Welcome to the group... you're gonna luv it here. . or the beatings will continue till you do. .
As for HP upgrades... . well there are a number of general theories as to what a stock system will take.
Keep in mind this is only my opinion and one which is always open to correction but... ...
I think that in stock trim our trucks will turn in about 140-150HP at the wheels with an auto trans.
Our convertors are notoriously inefficient for use with a diesel engine since they really were designed to used behind a gas engine turning higher RPM's.
The stock TC has a rough 'stall speed' of between 1700-2000 RPM (according to the DC manual) which usually means about 1800-1900 RPM in the real world. It's at this point that it begins to become efficient. (generally thought to be a max efficiency of about 70-73% at best)
Basically it was designed to work in/at a different range than the engine.
What happens is that alot of the HP upgrades do in fact get "eaten up" by this loss of efficiency, and becomes HEAT.
Our stock transmission, the A518 is a 727 with an OD (overdrive) added.
The A518 is a good trans. It should handle up to about 200-225 HP if it is in good shape to begin with. (BTW, thats RWHP, not Flywheel)
Still, it will begin to show signs of stress at those levels and eventually need work.
If you are going to upgrade your HP, then GET GUAGES!! for starters, since you'll need to know were you are now and were you are after upgrades.
Second, I'd consider a full service, increase basic line pressure a bit and make full use of OD lock-out while pulling hard. transmission temps on our trucks have always been higher than the new ones with highs of as much as 275*F

so use an extra cooler.
In fact there is a thermo-switch that will force your transmission out of OD when you get up around there. It wouldn't have that if it didn't ever reach it, right?
A shift kit will help you control slippage and minimize heat for the short term by increasing internal pressure(s).
In the end, you will need to upgrade your convertor, transmission/valve body to hold onto these beasts.
230 HP can be had for ohhhhh, around $1000. 00.
Pump tweaking (free), timing, injectors (actually ease stress on injection pump), airfilter/exhaust is most all that is needed.
The real issue is mentioned by Snow Man, you always loose about 18-30% in driveline losses/heat etc. with an auto. If it's stock you're closer to 25-30% loss on a used system.
Ok, I hope I haven't depressed you here, but there is alot of HP in that motor if you do it right, and you will need to take it easier till you can get the driveline upgraded to hold it/transfer it well.
The short term key is lots of service, use your OD lock-out, and watch your transmission temps, with occasional romps into the 230-240*F for SHORT TIMES as a general rule of thumb you should get reasonable service from it.
Well, I think that's all the unintentional damage I can do here, so, remember, no matter how much HP you have, you don't have to floor it all the time right... ??
OBTW, your mileage will go DOWN until you stop playing with it like a kid
Ok, ask away, there's lots of knowledge just waiting to jump out at you if something's not clear.
Regards, Bob.