Jeep Wagoneer Limited Transmission issue

Here's the situation.
I bought a 1990 Jeep Wagoneer Limited a short while ago. I was in
pretty good shape minus a known issue with the automatic transmission.
It will not usually automatically down shift into first gear when
starting or coming to a stop, but you can manually shift into the 1-2
gear and then put it back into drive once you get up enough speed (ie
5-10 mph). The issue I have come to face since then is that the tanny
fluid smells burnt and there is an issue with the gears slightly
slipping after the car gets really warm (long, tough drives). I first
noticed this when taking a somewhat long drive (50+ miles) with a lot
of steep hills and climbs. It had more or less driven fine before that
(other than the issue with first gear) for a few hundred miles. I was
heading up a long hill when I noticed a loss in power as the power
didn't seem to be transferring from the engine to the wheels (high
revolutions) and when I looked at the heat guage I was in the red. I
pulled over and let it cool down for about 20 minutes before babying it
back home (which it made without much problem). I actually drove it
around a bit without much problem after that and decided to do a
transmittion fluid change as the level was pretty low and I thought
that could have been part of the cause of the overheating problem, and
I could check the pan for metal pieces from a tranny I might have
destroyed. When I did the change there were no metal shavings and the
jeep actually ran really well for a while after the change but the
burnt smell slowly began to return and recently when taking it on a
longer drive (same as before) the fluid did seem to get hot again,
although now that I watch the temp like a hawk I know I was never close
to overheating (maxing out at about 210), and the gears would be
delayed in engaging when you pushed on the accelerator. However, after
cooling down the car seems to work more or less fine.
Does anyone have any idea what might be the problem?
Does it look like a cooling issue with the transmission fluid?
Do you think the tranny is shot?
Do you think the issue is related to the issue with first gear?
Any comments or suggestions would be greatly appreciated.
Thanks