Trans Fail safe program- Help!

[kwalk]

I searched and can't find anything like my situation or just don't know what to search for. Last night I'm on the freeway and I hear a terrible winding, screeching, grinding sound and the trans fail safe program light comes on. Got off the freeway and managed to get into a hotel parking lot. Looked in the manual and did as it said. Cut the car off, wait and restart. It cranked just fine, but when you move it gear it screams again. It sounds like something is dragging on the ground, but nothing there. A lady comes out and tells me it's the transmission and there was smoke. We never did see any smoke or smell, but each time I moved it in a gear the noise started back again and it actually sounds like something has fallen and is dragging. It will not go in gear at all. We spoke to a shop today and the guy told my husband that the transmission would not make the noise like that. Any ideas? Any one had this happen? Please help and thank you. Oh and my check engine light has been blinking, but I thought it was from bad gas and put techron and lucas in it.