2)-the test pressure will show pressure at idle and decrease to near zero as the throttle is opened. As the throttle is opened further it will increase pressure again.
This condition will drastically shorten the life of the trans and result in little to no trans pump pressure at cruise conditions. Where you spend the most time. This typically does not affect drag racing as the throttle is opened in less than a tenth of a second.
1)too tight will typically show 90# of pressure at idle and increase to max pressure as the throttle is opened. Reduced economy and small increase in trans heat
This condition will hold up fair, but typically will cruise closer to max pressure and not the designed 90# at light throttle.
The above is for oem transmissions.
The test port is on the drivers side, a few inches above the pan.
HTH