I had the same problem... according to the garage, the auto tranny clutch plates were worn down and eventually broke up. Your basically looking at a new tranny, but check your tranny fluid first, and see when was the last time you had the fluid replaced.

As for manual->auto swap... its not a direct bolt in. The auto tranny mount sits about 1" higher then the manual... so you'll have to cut the tranny mount and have it rewelded....