Did you hear any knocking noises?
When I had a rod throw on my 88 F150 302 I had similar problems (I don't have a OD trans) and it would get to 2nd gear but not into third I pulled over and noticed what you said a few minutes later after running it and a rod went through the pan. Everybody I talked to agreed it would be best to replace the engine so that is what I am doing.
$1500 sounds a bit high to put in a used engine but of course I do all my work myself so I couldn't tell you for sure.
88 4x4 RCLB custom, 308 C6 w/shift kit, 3.55s or 4.10s, flares, bed rails, black mirrors, bed caps, CB
92 2wd SCSB custom 300 M5OD 3.08s no muffler exiting before the tire black bumpers and wheels