1996 Buick Skylark Varnished Transmission

I just bought a 1996 Buick skylark for $1500. Naturally on a car this old, it needs a few repairs, but it is able to be driven. So I took it out a few weeks ago, and I went a about 40 miles, on the freeway, and suddenly, the "check engine light" and "ETS off" light came on. I drove it home, and the next day I went down to auto zone to get the OBD II reader and check the code. It reads P1870 and states that its a transmission slippage. I took it to a transmission guy who informed me that the reading was correct, and went through the motions of inspecting it. He soon told me that it was a varnished spline or torque converter, and that he would add an additive to help possibly free the varnish up and stop the transmission from slipping, but he says if this doesnt work, he has to take the tranny apart, clean it and while we're at it we might as well just rebuild the whole thing for around $2000. Well, the car wasnt driven for a few days, and so I drove it yesterday to check it out. This time it made it a little further before there was a slight "bump" I guess you could say, and the light came on again, we used a reader that stated it was a code P1870.

How long should I wait before I start contemplating the manual repair, and is it true that "while we're at it we might as well rebuild it"?