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AOD's are a strange tranny, My club rebuilt one for a member and it wouldn't shift either. If I recall right we had to run the rig on jack stands for a half hour or so before it started shifting correctly, Try posting your question on norcalbroncos.com for more info.
My money is on the valve body. as broncobowsher said they are very thin valve bodies and warp easy if over torqued. The valves will also stick if fluid is not extemely clean.
If you end up needing a valvebody. I have a good one with an 3-4 shift mod ready to bolt in. IMO, I would not use a AOD without some 3/4 shift mod. It makes the AOD more of a performance tranny.