I have an 81 Capri with a .030 over 302 and built c4 trans from a 71 torino. I recently replaced the filter and pan gasket in the trans while doing a new converter swap. After all was said and done, the trans started slipping when shifting....and I noticed that in the drain pan was a little spring and cap type thing. Did some googling and discovered that it was necessary for shift pressure. I installed the cap on top of the spring with the nipple down into the spring...reinstalled filter and gasket. Filled the trans and started it...and watched the fluid come blowing out around the back of the tranny. I got under the car and noticed the fluid was coming out of the vent thing on the tail housing. Ummmm...why?

 

Is picture #1 the spring and pin youre referring to?? If so,there should be a tab on the filter which fits over top of the spring once the filter is installed.I believe theres supposed to be a small roll pin that you slide into a slot, thats
machined into the valve body,before bolting the filter in place.It'll become clearer once viewing the pics below.
If your transmission does use a roll pin,you can find them at the hardware store.

First, the spring pin is placed on top of the spring ,the spring is then inserted in the valve body,then the filter is positioned and held in place while the bolts are screwed in then tightened.
If you find its a pain to hold the spring in place while holding the filter in place while installing the bolts,you can bend the tab (that covers the spring once installed) down a little on the filter before you install it.Now bolt it on loosely,slide the spring in place around the bent tab,bend the tab back then tighten the bolts.



The spring & pin is the pressure limit valve in a C4.Its needed for correct line pressure.

I found the following pictures from another thread on this site.
(Pictures SOURCE: killerzap)

 

Yes...that is indeed the culprit. I have it installed just as you have it pictured...cap on top tit down into the spring, spring installed cap up. Where I am confused...why is the fluid leaking out of the vent tube just by gravity? The car is not running, there is no line pressure at all and the fluid comes pouring out the vent.

I replaced a non working GER Thunderbolt converter that was "up to 4500" stall speed with a new Hughes 4000 rpm converter. Without the cap in the valve body, it slipped shifting in both 1st to second and second to drive...where it did not slip before. So how could reinstalling this cap cause this sudden leak issue?