I just installed a T56 into my 88 Formula a few days ago. The transmission is freshly rebuilt. I am using a new LT4 clutch and pressure plate and all new hydraulics. My problem is when i downshift into 2nd it will grind and pop out of gear. It also grinds going from 3-4. All of the other shifts are smooth. It almost feels like the clutch isnt fully disengaging. I havent bleed the hydraulics yet and I am hoping that this the problem. Any thoughts on what the problem could be?

 

Well you can bleed the hydraulics and retest. Usually it won't pop out of gear unless there's a problem with the trans itself.