It is not out of the realm of possibility they put in a complete rebuilt lockup transmission. I don't know that a partially engaged lockup converter is even possible on a Torque Flite but if it is that would account for low engine RPM in gear. Kind of like slowly releasing the clutch on a standard shift car to the point where the engine almost stalls. If the converter were stuck in full lockup, which I believe was the more common occurrence, the engine would just flat out stall, like coming to a stop in a standard tranny car and not releasing the clutch. GM had the same problem with the early LU converters but theirs was from a different problem.
So I guess what I'm trying to say is, I'd be looking elsewhere for what's causing low idle in gear, like vacuum leaks.