Engine and trans swap

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Dave171

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I recently traded for a 96 4x4 Tahoe. The guy said that the trans went out and he replaced it with a 94 4l60e. He said it then started knocking. I got it and purchased a 99 5.7 with 80k miles. When I pulled the engine out of the Tahoe it had a cracked flywheel. I went ahead and put the 99 engine in. I only get one code and it is a p1860, I know that there is a difference in a 94 and 96 trans. It has a hard shift into 1st and 2nd, but it shifts into 3rd and o.d. with no problems. Is it a major problem? How can I fix it?
 
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