I've heard different things about the oil for the TKOs. First, allowing a traditional fluid to be used for "break in" makes sense in the sense that if any small filings are released, you can easily change that after the break in period. I've heard several debates about the GM synchromesh vs traditional transmission fluid vs Amsoil. I'd follow MDL's recommendations, or call them for advice.
As far as the grinding from 5th to 4th, again, seek professional advice (MDL) but it may be that your trans is out of line just enough to cause this problem. I was convinced I needed a rebuild (or at least new reverse synchros) because I sounded like a 15 year old learning to drive any time I started in reverse, and frequently got locked out of first gear if I stopped while in second (pulling up to a stoplight). My mechanic made a minor adjustment to the drive angle and everything was smooth as butter (and he saved me $1k).