[Monterey10]

Mmmm, dumped the tranny oil at 2700 miles and was surprised that
it had a gray cast to it. A small quantity of the gray sludge was attached to the drain plug magnet. Otherwise, the oil retained a new appearance.

Is this how your oil was looking?

 

[Jim]

I changed my engine and trans and Rear End at the 500 mile 1st service. (very important) At that time it is normal to see shavings (the greay sludge). I also did it again @ 1,500, not really needed but I wanted to make sure the shavings were out, there was a little. I have seen very little since. I just switched over to synthetic at 7,200 miles, and noticed just a very little bit.

Did the oil get changed @ 500 miles?
If so a little is OK, if not, there was probably is quite a bit in there.

 

[Monterey10]

Yes

The oil was changed at 600. I thought I would see the
gray color then, not at 2700miles. (?)

 

[allwalk]

It is normal to see a small quantity on the second change as well. I changed mine at the first interval 600 miles and then again at 1200 miles. The longer you go between your first few changes the more grey sludge you will notice.

You should start to notice your gas mileage increase a little now.