This has me really confused because I can reset the KAM and it functions perfectly in OD for a day or two and then the tow/haul comes back and wont allow it into OD.
After resetting it will operate normally until the problem occurs again, then the codes set and the failure mode protection kicks in. In this case, the failure mode is to not use overdrive, which is used in gears 2, 4, and 6, as pointed out above.
My question is why am I having troubles with 2nd gear but the trans is throwing OD codes?
To answer this you need to know how the trans works. It's really a three speed (the final derivation from the old C6 design) with the two speed overdrive unit in front.
Here is how it shifts:
First gear: Overdrive in 1:1, three speed in 3.09:1 Ratio is 3.09:
Second gear: Overdrive in 0.71:1, three speed in 3.09:1 Ratio is 2.2:1
Third gear: Overdrive in 1:1, three speed in 1.54:1 Ratio is 1.54:1
Fourth gear: Overdrive in 0.71:1, three speed in 1.54:1 Ratio is 1.09:1
Fifth gear: Overdrive in 1:1, three speed in 1:1 Ratio is 1:1
Sixth gear: Overdrive in 0.71:1, three speed in 1:1 Ratio is 0.71:1
Depending on a couple of different factors the trans uses either fourth or fifth gears, it NEVER uses all six gears.
So if the OD solenoid or clutch is working only gears 1, 3, and 5 are available.