It should run fine with ATF. The MTL just gives longer synchro life.
It should ALSO shift smoothly. I've been driving an LT77 for the past 10 years and it shifts smoothly and never grinds.
Sounds like the clutch is not disengaging fully.
Labour price sounds very high. You could have easily brought in a rebuilt transmission from the UK for much less.
http://www.ashcrofttransmissions.co.uk/category_5.html
