I once had an overdrive problem on my old 88 740, the solonoid was clicking, the internal solonoid passage was clear. The solution was a flush using Mobil 1 synthetic ATF. The problem was immediatly corrected and never came back. I would highly recommend a flush as your next step.

The function of the solonoid when it picks is to release pressure from the center channel and allow the released ATF to dump back into the sump via the outer hole.

The integrity of outer O ring will have nothing to do with your present condition, if it were bad the fluid would simply leak to the ouside, it has nothing to do with passage of fluid through the channel.
--
David Hunter