I recently found out that a previous owner removed the 4 speed transmission and replaced it with a 3. Why would you do this?

 

The early to mid '80s 4-speeds weren't that strong. They were still a fairly recent development, and they used a TV cable rather than a vacuum modulator. But the buyers were used to the old driving styles. Also, GM was combining these new transmissions with too-tall axle ratios in search of more MPG. The net result was the converter locking, unlocking, locking, unlocking, plus the trans shifting 4-3-4-3. All of this, just running down the highway. Some folks just shifted to 3rd, and that was sort of good.
So anyway, you had this 4 speed that's gonna fail, and you're not addicted to the new overdrive.
Why spend extra on that, when there's the TH350? By that time, it was fully developed, and well proven.
That's how we got in this mess. If you're running a 2.73:1 axle, then living without the overdrive is not too difficult. But if you have 3.73:1 gears, then the overdrive is more than worth the hassle.
The TH350 having a much taller first gear made for a whole different feel than the 700R-4. Again, remember that the TH350 was what people had been accustomed to. The 700R-4 made for great acceleration up to 25-35 mph, but the TH350 held first gear to 40-50 MPH. Different people have different ideas about which seems faster, when trying to get up past 55 mph.
But the TH350 also had closer ratios, so the rpm didn't drop as much on the upshifts. It seemed to keep the engine in the powerband.
These days, a rebuilt TH350 costs half as much as a similar 700R-4, and same for the torque converters.

 

False sense of economy.

 

Maybe not. You won't catch me going back to the TH350, I'm researching a 6L80E swap. But while the TH350 has the extra cost of converting to it, it may not hurt your MPG, depending on your exact specific combination. And if there's no MPG benefit, then the OD never pays for itself.
Also, what's the cost difference between one TH350, versus a string of ruined 700R-4s?

 

Thanks for the response. It sounds like I may have to change my rear gears. When I take the car on the highway I can't hold 100KM/h without constantly giving her gas and keeping the RPMs at 3000. It seems as though she wants to shift into the next gear but the gear simply isn't there. At least that's what I hope it is.

 

If your speedometer is fairly close to accurate, then your rpm is about right for a 3.23:1 or 3.42:1 axle, ( depending on the converter ) 26" tires, and no lockup.
Swapping to a 2.73:1 axle should drop you 400 rpm. Swapping back to a 700R-4 instead should drop you about 1100 rpm, including the lockup.
The axle swap is cheaper and easier, initially.
But I sure wouldn't do it.

 

exactly. th-350's are kind of bulletproof. so when thier 700r4 failed. or they didnt like it they swapped in the 350 and called it a day.

 

"bulletproof"?!?!
Well, yeah, if you're comparing a rebuilt TH350 to a worn-out 700R-4. But I've lost twice as many TH350s as 700R-4s. I even had a TH350 fail, out of the blue, just doing 65 mph, level ground, '75 Camaro. Totally munched it. No any gear, not even reverse. But with the 700R-4, I've always had first gear, no matter what else went wrong.
Obviously, opinions are based on experiences, and your results may vary.
I admit the TH350 has less stuff to go wrong, but that doesn't make it better for everyone.