My old 86 Volvo 760 Turbo Wagon had the same problem. It's problem was a spring in the tranny that had broken. This repair had an estimate of around $1500 Canadian, which also included new parts that were damaged simply by driving the car with the borken spring in the tranny. It shifted roughly between 1-2. but was fine otherwise. I didn't have the speedo drop to 0 between shifts though.

Being a 90, there are actual mechanical linkages that control shifting to a certain degree, and those can be mis-alligned, altough if this were the case, I'm sure they would have already found the problem and fixed that. My uncle's 91 Volvo 940 Turbo Sedan had this problem. It shifted horribly between 1-2 and we all thought it was a tranny problem. We took it to the dealer, the mechanic showed me the part that had to be adjusted and voila, smooth as a baby's bottom.

In any case, if it can't be diagnosed by a Toyota dealership to be an easily made fix, you are probably looking at the typical tranny repair of about $1500.