If they found much of the brake fiber on the suction screen than it is brake repair time. You should not have hurt it too much if you just ran it two hours. The problems you described happened in just the two hours or where they what was going on while your FIL owned the tractor??? If they happened over a longer period of time then you could still have bigger issues.
I would drain the oil my self and pull the sump screen an look at it. I am willing to bet that it is completely stopped up. If this is the case you still may have done some serious damage to it. NEVER run a JD if you find many brake fibers in the sump screen. You can damage the complete hydraulic system. If the brake fibers are in the sump screen the brake are shot any way so fix them before anything else is ruined. Also fix that Hi-lo issue too. It can starve the complete hydraulic system as well.
Moral of the story. JD Mannheim built tractors need to be watched for hydraulic issues an fixed CORRECTLY/QUICKLY when they first appear or you will be spending big money down the road.
Get us a few more details and we will try to help all we can.
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