Quote Originally Posted by v8volvo View Post
It is definitely first gear that it is dropping into -- I have pulled the gearshift down into "1" and verified that.

I still bet it's 2nd. The trans is shifted electronically by solenoids. 2nd gear is all solenoids off, hence the default. Pulling the lever to 1 tells the PCM to switch to first, but if it's in limp mode already, nothing happens.

Check the codes. If there are solenoid codes (81, 82 or 83) I'm still betting it's a power problem.