There's only a couple of ways to run a 727 without kickdown (more correctly, it's throttle-pressure) linkage: Either you fix the transmission's arm all the way back, held by a spring or bracket or such, or you pull the throttle valve out of the transmission's valve body and install it backwards (this is how I did it on my full-manual valve body). Either way is going to get you full line pressure all the time, which results in high upshift speeds and very-hard shifts. My full-manual 727 screeched the tires on
every 1-2 shift, regardless of throttle input, which explains why a different valve body was installed in less than 2 weeks.
A Torqueflite's lifespan without one of those three solutions is usually measured in minutes. If your kickdown lever on the trans is all the way back at full throttle, you should be good. If it's shifting that softly, though, I wonder if it's not hurt.
Also, I've said it before and I'll say it again: Use
only Ford Type F or Type FA fluid in a A904/A998/A999/A727. Yes, I know the factory spec is for Dexron II (now Dex III/Mercon) but Type F/FA is key. You'll get better shifting and longer life,
period.
I'd take a journey inside my transmission pan to look for a couple of things. First, I'd drop the valve body and if I found an accumulator spring I'd toss it in the trash. If he put a shift kit in it, this should have been in the instructions. The other thing I'd do is check the line-pressure adjustment screw. That bad boy should be backed off until there's either 1 or no threads showing to the inside (put Loctite on it if you're paranoid--I am!) and I'd put it back all back together, of course topping off with the aforementioned Type F.
Chances are if you've still got a bearing noise, the wheel bearings are wiped out from being run at excessive endplay. That would suck; the bearings/seals aren't cheap and you need either a press to replace them or pay someone to do it. If adjusting the wheel bearings helped but did not solve the problem, that would be my guess. If it didn't make much or any difference, I'd be looking at either pinion or differential side bearings. I'm actually starting to wonder about the pinion, because that could be causing your mystery thump as well. Check for F/R movement of the pinion. If there's any at all, the pig's got to come out and a new crush sleeve installed, along with new pinion bearings. If you've got it that far apart, you might as well replace the diff's side bearings as well.
Brake fluid: DOT 5 silicone would have been a better bet. It won't harm paint. It's a damned shame it's $20+ a quart, but it's a lot cheaper than a paint job should you spill or have a leak.
It sounds like the PS box needs a seal kit. They're cheap (a few bucks) but some of the seals are a bitch to install.