Hi everybody!

Thanks in advance as always for your help and patience as I sort through the coupe. Some background to set up my concerns.

Picked up another 97 XK8 with 108K, runs and drives with only minor issues to replace the blue one I am now parting out.

After running for 20 minutes or so I am getting the mystery grinding / scraping sound from the transmission that has been mentioned in other posts, sadly with similar symptoms that others have reported. Trans at operating temp, going usually uphill, moving at 40-50 MPH and I get what sounds like the torque converter rubbing on the inside of the bell housing... Release the gas and it immediately stops. What I find strange is that it won't always occur at the same speed or RPM, will sometimes occur down hill or on level terrain and isn't always replicable. Cold start to car indicating warm there is no issue and I have never heard it outside of the 40-50 MPH window (at least that I am aware of). Also passengers have said the sound is coming from the rear of the car and not the trans so I may be mis-locating the noise.

Otherwise there are no other issues with the trans. It shifts cleanly, always goes when asked and will find reverse with no concerns.

So...

This motivated me to go ahead and do a trans service (drain, filter swap and fill). I did a drain first, refilled it and drove the car for a day or so. I then drained the pan again, dropped it only to find that it had definitely been serviced prior to my purchase (no issues with the pan bolts and an aftermarket filter installed). Swapped in a new filter and refilled to spec with Ravenol fluids and drove for another day only to have all of the noises return within 24 hours. When I pulled the pan there was a ton of metal filings on the magnets and the pan had plenty of aluminum sparkle on the bottom but no chunks (photo attached).

So how shafted do you think I am...? My best guess is a failing torque converter but other folks with similar issues have pointed to all sorts of other things. Anyone have a best guess??

In good news though the valve body looks great and if I understand correctly it looks like it has been serviced at some point and the transgo kit swapped in (the blue solenoids), correct?