"Incorrect ratios" could mean that the transmission computer is attempting to select a gear and for whatever reason (mechanical failure, solenoid pack failure, sensor failure) the transmission isn't going into that gear - and since the computer doesn't get confirmation of the shift, it says the equivalent of "I'm in third, but the gearbox says I'm still in second... wait a sec, that's not right..."
Clunk noise would argue that the solenoid pack is still working but that some other part of the mechanism has died; this will put the system into limp-home mode in order to try to preserve what you have left - hence why it's only got two gears.
Chances are pretty good that this is due to the classic $0.50 VW Transmission Cooler O-Ring Failure. VAG
never seems to do enough US-climactic-condition testing.
Enormous ripoff. No, seriously. $7300 will buy you
a lot better than that (might want to look really closely at what this one is
), especially as that Rio doesn't have a warranty any more. Even if you don't want a Jaguar, you can get better deals. As pointed out above, a 2008 is about the same price, and you could even have found some leftover 2009s for that price - and that would have had a warranty.
They're still running ads for it that way. They're trying to get people to buy the 'navigation-as-a-subscription' idea rather than shell out for real navigation systems in lesser cars. Government Motors for you there.