I have an 87 22re 4x4 with an automatic a340h transmission. just got through with the motor for the 2nd time in 5000 miles. headgasket failed. bought a new street/rv head from engnbldr, already had the 261c cam, had to put new bearings in due to the antifreeze. but to the new problem, engine is running fine with a little more power, but the transmission or drive train is acting up. it seems to me that it shifts too fast and it shifts real hard from 2nd to 3rd. as long as you are in the throttle there seems to be no real problem, but when you let off of the gas to 1/2-3/4 throttle it jerks, if you let all the way off of the throttle, no jerking. i am the 2nd owner and it has 187000 miles on it and nothing has been done to the transmission. any suggestions?

 

Check your tranny pan first. If it looks good, I'd start checking your drive shaft, ujoints and rear end. Also, if you have big tires make sure you're rear end is geared correctly for them.
Another thing, is your tranny modulator and governor. I'm not sure if Toy auto trans have them, but it is possible. If they do, check to see that your modulator is working properly and your gov assy. isn't clogged up with metal flakes/particles.