Most Tremec customers comment (some complain) about the 'notchyness' of the shift quality, Karl. Some guys get lucky, most don't. The upgrades that Brent suggested will all significantly improve the shift quality.
There is another contributor to the shift quality issue and it is the internal timing that Tremec builds into the shifting mechanism. Liberty offers an improved internal shifting rail replacement to correct the problem.
You can send the transmission to Brent or Tremec for the upgrade or you can do it yourself in your garage on a Saturday morning. I bought all the parts from Liberty, bronze shift pads for the shifting forks, carbon fiber synchronizer rings, and the shift timing corrected internal shifting rods et al. for mine. Total time to do the job was just about 4 hours on the bench and I was going slow, reading the Tremec manual to guide me through the process. If I had to do it again I could probably do it in an hour or two.
BTW in the event you choose to do it yourself before you begin, get yourself a tube of Honda-Bond or Yama-Bond. There is no gasket between the tail shaft and the main case or for that matter anywhere else. The Honda/Yama bond stuff is how you seal two machined surfaces up to prevent
oil drips. It is really impressive stuff!
If you send the trans to Liberty they can also replace the frontmost bearing support for the countershaft. I think Brent offers this also but do not know for certain. FWIW this is not a must have sort of mod but it is definitely a nice mod and makes for a significantly stronger transmission. You cannot do it at home unless you have access to a Bridgeport and then you are playing with the main case. Better to let them do it if you intend to use the mod.
BTW when you are done the shift quality approaches that of a T5 — it is that big of an improvement!
Almost forgot the entire parts package was about $280 back then. I'm not sure what it might be today. One more point worth mentioning you can save a little money by not using a carbon fiber synchro on first gear. We usually do not speed shift into first gear so the brass / bronze OEM synchro is more than adequate.
With respect to the deep first gear on your TKO500, I believe all TKO500's use a 3.27 first gear. The TKO600's use a 2.87 first gear, if I remember correctly. To my knowledge the first gears are not interchangeable. If you want the taller 2.87 first gear the only path is a new transmission.
If you decide the new transmission path is the route you wish to pursue, you can buy a fully modified (with all the mods I spoke of above) from Brent or Liberty. I believe Brent offers the internal shift rail upgrade but I am not certain. However, he can tell you for certain.
Ed