The problem is the 305. Woof, woof.
There is more parasitic loss in a TH400 than a 350 (some folks say as much as 40 hp) but the TCs are interchangeable...and if they're both stock, there shouldn't be much difference.
If they ARE stock, the stall speed is probably around 1200-1800 rpm (if that high) and won't let the motor get wound up enough to produce enough power to light the tires.
There are a coupla ways around this...but none of them are easy: replace the torque converter with a higher stall speed unit (2400-2800 rpm) and/or replace the 305 with a more performance-oriented motor like a 350, 383 or 406. (406 is my choice...but I'm prejudiced cuz I have a couple of them.)
Seriously, you've got a low-power motor coupled to a high-power transmission....and you're seeing the results of that mis-match.
At least you don't have the opposite combination: a fire-breating rat motor and a TH200C....the symptoms would be a little different...like ATF all over the street when the tranny grenaded.
But then the solution would be evident.
