Not sure about a TH400 but the 700R has an oring seal on the output shaft (not the lip seal in the tail housing) that has to be in place to prevent oil from migrating down to the splines. The o ring can easily be installed by taking the tail housing off (requiring a new tail housing gasket). Do a search on Google; you should be able to find an exploded view of the trans showing the seal.

mike in tucson