At least the rag got a new home to be useful in.
I'm not sure on transmission temps, seems like "hot" is around 400 degrees, but CMIIW.
More slip does generate more heat, but CAN limit any potential damage.
It's exactly what Dodge did to attempt to help the overdrive (518) in our 1st gen trucks to live a bit longer to make warranty.
When Dodge introduced the 518, they also made the over-the counter under-bed cooler available, in attempts to combat the extra heat.