Valve seals and transmission slip

[chevymotocross]

Got an 87 Silverado 2wd with a 305. The truck has almost 200,000 miles on it and is due for some work. It's been lacking power and having some transmission slippage. When I bought the truck, it always smoked on startup. I am now ready to actually fix this once and for all with valve seals.

I was told to buy the umbrella type seals since the factory o-ring type stink. What is needed for this job and are there any suggestions to keep parts from falling into the engine when I do this job?

I will also be replacing the plugs after I do the seals. I never changed the plugs since I bought the truck 2 years ago, and who knows when they were changed before me. Plus with leaky valve seals, I bet they are shot. AC Delco recommended?

When it gets cold, like it is now in New England, I notice the truck has some wierd shifting when I first start driving. It did this last fall/winter as well. It slips a bit. Once the truck warms up, it shifts better. Fluid is at proper level. Should I change filter or is this transmission considered junk?