2008 R320 CDI...had extended warranty to 100k.now at 101k no shift from 2-3 auto

What is your question?

I can use the manual finger paddles behind the steering wheel to shift...the problem really seems to happen with 3rd gear and the automatic function. Took it to dealer who was puzzled and offered $7400 transmission replacement from Germany. Seems strange and drastic ( and EXPENSIVE!) to me...always dealer serviced and well taken care of. Please help...could this be a recall in the making? Can it be rebuilt?