Borg Warner T86 - R7 overdrive - Problem

[Mbstude]

First, I apologize in advance; but it seems that Mopar used the R7 overdrive more than any other manufacturer and I’m having a difficult time finding info elsewhere. I’m hoping someone here with more experience can shed some light on the topic. 
 

I’m very familiar with the later R10 and R11 overdrives but the R7 is new territory. It’s my understanding that it’s a fully mechanical/centrifugal system with an electric cut out solenoid. 
 

I have a ‘41 Studebaker Commander with a Borg Warner T86 and R7 overdrive. 
 

The car is a recent acquisition. The previous owner (deceased) finished an extensive body-off restoration about 20 years ago. It was driven 200 miles and sat in his garage since. I think I’ve figured out why. 
 

Problem:

 

With the overdrive cable pulled out (OD disengaged), the transmission works flawlessly as a straight 3 speed. 

 

With the overdrive lockout cable pushed in (OD engaged), the transmission free-wheels in all forward gears. It’s as though the transmission is in neutral. 
 

However, if you give the engine some gas and get the RPMs up, there is a loud BANG and, albeit violently, the transmission engages and the car launches forward. 
 

I drove the car down our mile-long driveway and confirmed that the OD is functional at 30+ mph. 
 

I have had the OD section apart 4 times and have replaced every single internal component with original NOS parts. The problem persists. 
 

I am at a loss as to what to do next. Anyone have any ideas or insight?

 

Thanks

 

Matt

 

 

Edited December 25, 2020 by Mbstude

[plyroadking]

Does it "bang" when you accelerate gradually with the overdrive cable pushed in? and when you shift into a different gear and the engine catches up to the rear end? To me it sounds like the sprag clutch is isn't installed quite right or there is a piece or two missing? i think i have an exploded image of them in a book if that'd help? I know the R10s will bang if you're "free wheeling- governor has dropped out and you're sprag hasn't engaged" and that'll put divots in the center piece, if you hit it hard enough you can reduce it to a paperweight