With all due respect to your retired mechanic friend but he couldn't be more wrong. The fluid in your transmission was worn out and needed replacing 50k miles ago. Flush it completely.
To convince yourself, pull the dipstick and wipe it with something /really/ white like a piece of printer paper. If the fluid on the paper has any black or brown on it at ALL than the fluid is burnt and needs to be changed. At your mileage on the original fluid I personally wouldn't even check - I'd just replace it.
Mobil 3309 fluid, or Toyota T-IV fluid is OEM. There are some synthetic fluids that meet the spec as well.
Bevel gear also needs a fluid change ASAP. Fully synthetic 75W-90 GL-5. AMSOIL makes a great one called Severe Gear.
--
1998 V70 AWD->FWD->AWD Turbo 215k+
|