When you drop the pan, you usually see this big plate looking thing bolted in with like 2 dozen screws. That is the valve body. The tube on this thing is what holds the pressure for the valve system to operate. Depending on what valves are open, this is what decides what gear(or share) is actuated. When you lose that tube, you end up with very low pressure. You experience slipping, lose 3rd gear, then 2nd, then 1st and reverse.
The behavior you described is something I associate with an experience when my car broke down in Vancouver. ATF was spilling out faster than I could pour it down the fill tube. Of course, in your case, I don't know if it's actually shooting out the top or going through a chewed up seal and leaking out the front of the bell like mine did...It could literally be anything. The safe bet is to do a rebuild.