I think torque converters are quite misunderstood... It is not as if a high stall speed converter is the equivalent to dumping the clutch at the stall speed; rather the stall speed is the RPM at which the torque converter is operating at full efficiency (e.g. the input RPMs will not increase if the output shaft is not allowed to turn). Up to the stall speed, the torque converter (if properly designed) actually multiplies the torque supplied and allows the engine to rev into its power band quickly. Note also that the actual stall speed for a converter is dependant on the power output of your engine; racing converters are built to your engine specifications. An off the shelf 2400 RPM stall speed converter might actually achieve stall speed at over 4000 RPM behind a very powerful engine.
While under the stall speed, the converter allows slippage which does generate heat which can be a concern depending upon your gearing. The AOD was designed with a "lock up" converter which totally eliminates slippage (and the associated heat build up) in overdrive. Note that some performance AOD converters eliminate the lock up feature since the direct drive shaft can be a weak link in these transmissions.
A high stall speed converter , when not accelerating hard, will generally be less efficient (e.g. get lower milage and generate more heat), but does not affect drivability significantly. Think of it as slowly letting out the clutch... but instead of wearing out the clutch you are generating heat. ALWAYS use an auxillary transmission cooler and you should not have an issue.
What is the application, and what modifications have been done to the transmission? If you are not running sticky tires, you can put a ton of horsepower through a lock up converter, since your tires will act as a safety valve... they will be a weaker link than the direct drive shaft. Also, when building an AOD for high horsepower applications, many opt for hardened direct drive shafts (about $300). Finally, the AOD was not designed for extended Wide Open Throttle (WOT) operation while in overdrive - the manual states that you should shift into the 3 position if you intend to "floor it" for a while (e.g. it is okay to punch it while passing, but don't run wide open in overdrive as you cross Texas or are in a high speed pursuit). This is due to concern over the overdrive bands, not the direct drive shaft.
In reality overdrive is for fuel economy, not racing. Since the lock up feature is only for overdrive, and you really should not be punishing the transmission while in overdrive, I don't see it as an issue. When you want to really use your power, just drop the shifter back a notch.
I have a lentech AOD in my 67 vert, its a street terminator+, with 3.00 gears with the 351w I had It would turn 2300 rpm at 65 or 75 on the fwy, so yes it slipped, I am told by lentech that once the 3.50 gears are installed it wont slip as much and the car will feel much lighter, which makes perfect sense.
I have a 10" custom converter, now with my 408 stroker it will flash up to 3500+ rpm just by blipping the throttle. I'm not sure how much a lockup type set up will handle, for me I opted for the non lockup one pc input shaft so the trans will handle 800 hp no problem.
With 500hp/tq I have now I'm wondering if I really need a stall coverter on a street car. I haven't installed the new diff yet so I guess I will know after that......
The direct drive shaft engages in 3rd, but full lock up does not occur until overdrive. On the Baumann tech pages, they refer to this as 60% lockup vs full lockup, however I have never seen a hard specification for what the relative percentage is. When the lockup fully engages, you can literally feel it!