Messed up automatic transmission?

I'm in Denver helping my dad out with a few things, and his 2000 Subaru wagon has an automatic transmission with the following problems.

1. It lurches and hesitates, terribly. Especially after it's warmed up a little bit. Consistent pressure on the throttle yields a terrible hesitation that can go on 4, 5, 6, 7 seconds and then it rushes forward. This is in first and second gear.

2. At a red light, with my foot on the brake, the car started to lunch forward rhythmically trying to go for it.about once every second. Had I taken my foot off the brake early there would've been an accident.

I have always driven a stick, and I have no idea about the complexities of an automatic transmission and how they fail, but this seems so very wrong to me. What's going on?

 

I dont know enough about automatics to give you a good answer, sorry. One other thing it could be is the AWD system. If it has a viscous coupler (VC) and the car was run for a while with a tire that was a different diameter than the rest (ie getting a new one without replacing the rest, or driving around with a tire thats underinflated), then the car could start "humping". This is similar to driving a 4x4 in 4wd on dry pavement for extended distances, the drivetrain binds because the VC has locked the center differential.