I bought my wifes '90 240 with over 100K on it and the tranny had never been flushed. Almost every oil change, I drained the tranny and replaced about 2.5 quarts of ATF. The fluid is a nice red now compared to the brown it used to be. I've probably acomplished the same thing as a complete flush but over a long period of time. We've driven the car over another 100K since I started doing that with no problems. I just bought a high miles '98 XC and will probably use the same process unless I find a good reason not to. Sorry for your problem but you got the car at a good enough price to absorb it. If you keep the car for the long run you'll get your money's worth and more.

Re: your Cat, can you change it yourself or drive across a state line? I sense a vacation in Mexico - hope it doesn't fail there. Shop around before dropping $1100. Enjoy your car and try not to sweat the bill. Stuff happens.