If the modulator diaphragm was busted you would most likely notice the white smoke pouring out the exhaust tailpipe.
How is the transmission fluid? Is it full? Does it still look red or does it look brown and smell burnt, which brings me to my next question, does the fluid smell burnt?
have you tried dropping the pan and seeing if there is a lot of debris in the pan, make sure the filter isn't clogged up with that debris?
If not, I would start with that and perhaps while you are at it, go ahead and install a new filter and an gasket and refill with new fluid.
You might also want to check the linkages down there for the gear shift, the kick down for being loose, etc. Also grab ahold of the tailshaft and try real hard to move it side to side and look up at the bellhousing bolts to make sure they are not loose and the bellhousing rocking back and forth.
If it has an intermediate band, go ahead and adjust it. If there is or was a lot of debris in the pan, that means something is worn out, most likely the clutches and/or bad and possibly even something else and it would then be time to have that transmission rebuilt or replaced.