First, I am not a transmission expert, but from what you said and my personal experience with the AW70 series I doubt you damaged anything.

The AW70 is a 3-speed transmission with an electronic overdrive that servs the same function as a 4th gear. The button on your shifter disables the overdrive, just like shifting from 5th to 4th in a manual 5-speed. The arrow on your dash illuminates when overdrive is disabled. At speeds below, say, 45mph, it effectively does nothing because the car's speed is too low for it to attempt to use overdrive. At highway speeds, your engine speed will increase about 1000rpm when you disable overdrive, because you're effectively shifting down to a lower gear.

The overdrive is turned on and off by a system consisting on the button on the shifter, a relay behind the ashtray, and a solenoid on the transmission. Probably 80% of the time, overdrive problems are caused by the soldered contacts on the relay developing hairline cracks which make it short out. To fix this problem, either reflow the contacts with a soldering gun or get a new relay (around $35). The FAQ has detailed information on this and just about every other 700/900 related issue.

jeff daigle
'89 745GL 137,000mi