Basically over time the oil breaks down and becomes oxidized. Also, the parts in your ATX slowly wear down and this "grit", made up of metal shavings, gets cycled around in the tranny by the fluid. This combination is basically liquid sandpaper flowing through the transmission with little in the way of lubricating properties.
You could probably try and do the 4-quart drain-n-fill each month for as long as it takes to bring the fluid back to its normal color (probably many months) but I would seriously start saving for a new transmission. BTW, at this point I would highly recommend against a complete flush. That grit has probably built up in the valve body and is filling holes in the seals. If you flush out the grit you'll have a valve body full of extra little holes which will definitely lead to a failure.
EDIT: I'm sure its just a semantic error, but you do know that there's no flywheel on an ATX, just a flexplate, right? Just want to make sure your mechanic isn't trying to screw you over or anything.
Last edited by hetfield; 02/10/04 10:34 PM.