Because your transmission is burning out. I have this exact same truck and the OD started to slip about 6 months before it and third gear finally went out completely. As it was slipping it had a bad tendency to "search" for a gear while cruising at 70 mph down the highway, and would constantly go back and forth and would slip into OD when it went. The tranny did have 160,000 miles on it, so I didnt complain when I had it totally rebuilt for $2,000.
YES
flat
That engine requires a 195 degree thermostat in it.
5 quarts
Its in the fuse box labeled trans
Most Likely Borg Warner T-5
That would be the 4L60E transmission.
5Qts. with a new filter.
4L60E automatic with overdrive.
Either before or after y pipe, or both, depends.
There is a sticker on the drivers side door that will tell you.
Assuming V8 gasoline engine, it should be bolted onto the intake manifold.