Sounds like a seal died inside somewhere. I was having issues with a rebuilt trans a few years back with the sluggish reverse engagement. Turns out it was one of the seals, don't remember which one now, but the trans guy told me it would eventually fail completely. So I took it back and he replaced all the seals with better quality ones.
B Dub, I would pretty well bet yours is dead. Mine did this with the original trans. It started out with light slipping between 2nd and 3rd gears, then one day it just gave up. It would only start out in 1st, then hit 2nd and would not go any further, just rev'd trying to go into 3rd, never would engage.
Shop around your local at transmission shops, get referrals from friends, relatives and whatnot, get the "feel" of the shop, if you will,, I've been to several shops I just didn't feel right having them work on my stuff. If it's too cheap, you're probably getting a shotty job or very minimal parts replaced.
I paid $850 to have my 700r4 rebuilt here in Phoenix, this after I tried going the cheap route with a $400 rebuild job that failed twice the same days it was installed. Turns out they really didn't do much cleaning of all the internals and valves, they just tore it apart, did a quick rinse and slapped in new clutches. The $80 rebuilder guy showed me everything as it was coming apart as to what the other shop did wrong and what they didn't do.
I have bought a used transmission from a local, former member of this site. that one got me 3 more years before it started to go out, I knew it was a time-buyer though and that was fine for me as I only paid $200 for it.
Me personally, I understand the money situation all too well, but I would find a way to either get a low mileage rebuilt unit, or just have yours completely redone for peace of mind in knowing it SHOULDN'T cause you any headache for quite some time afterwards.
Removing the trans yourself and taking it in for a bench rebuild is going to be your cheapest, rebuild option, a little more work on your part, but decent money savings.