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and RPM falls, but if you release brake in this moment engine stalls. I
tried to diagnose a problem myself and got detailed description of what
I did below.

Does it look like transmission has to be rebuild? replaced? Is it torque
converter (I would not think so because you can drive in reverse)? The
problem is that this car is not worth more than 6K and from what I've
read the price of transmission repair is close to this, so it does not
make much sense to do it. Any piece of advice would be be appreciated.

The detailed story goes as following: the problem came totally out of
blue. One day my wife take out the car to go to work, went down the
driveway in reverse (we have pretty steep slope in front of garage),
switched to DRIVE and that was that. I had to call AAA to get car back
into garage. Then I tried to diagnose problem:

1) Checked the level of transmission fluid. It turned out to be way too
high (a half an inch above MAX level when transmission is cold). No idea
who filled it to this level - I am not the first owner and I have not
touched ATF. Siphoned ATF out to proper level. ATF looks not very well -
it is pretty dark, but does not smell. It looked like things got better
- I could drive back and forth in garage (but did not want to go down
the slope).

2) Connected VAG-COM and looked at error codes. There was an error code
in transmission control module - "engine RPM signal is shorted to
battery+ (intermittent)". At the moment of testing RPM signal was fine.
I ripped floor and got to transmission and engine control modules.
Connectors are fine, no traces of water or anything. Applied dielectric
compound to them just in case. Error code got reset and did not come
back.

3) Put car on ramps (in reverse) - I don't have a lift which make things
pretty difficult - there is no clearence between my pot belly and the
bottom of the car :-). Drained ATF, and removed transmission oil pan.
Whatever I could see looked fine. No particles in ATF, though it is
still too dark to my tastes. The magnet in the pan is covered with about
1/8" of metal shavings - I don't know whether it is OK or not. Cleared
magnet, cleared pan, replaced ATF filter and gasket, put everything
back. Filled with fresh ATF to proper level.

4) Read on internet that one of typical failure mode for this car is
leaking seal between final drive and transmission which causes fluids in
both to mix with unpleasant results. Drained front final drive (I can
not get to filling plug in the rear drive without removing exhaust
system and it is almost impossible to do without a lift). Gear oil
smelled a bit strange and looked a little dark but I could not say
whether ATF leaked into it or not. Filled with fresh gear oil.

5) Tried to drive car forward off the ramps - no such luck.

I do not think that I am up to removing transmission myself. I did this
(without a lift) for my Ford Aspire when I was replacing clutch, but
that transmission I could lift up with one hand. I am not sure I can
bench-press one from Audi :-).

Again, any advice is appreciated,
Alexander.