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The light is blinking because something is making it set a code. The most common code on these is a "slip" code. It could be many many different things. You will need to retrieve the codes from the computer and this should lead us in a direction. It could be a sensor or a mechanical concern inside the transmission. Let me know if you can get the code(s).
I can't say I can fault your mechanic for what he did. He was probably trying to save you some money. It was worth a try. The most common cause of the slip codes is the torque convertor on this model. However, It may need a trans overhaul. If it has some clutches slipping inside it will set these codes. If the fluid was discolored it most likely has some slipping clutches. So, without knowing the exact code my first guess would be torque convertor and then an internal trans concern.