I have a PacBrake PRXB on my 2004.5 which is the same as yours. The stock transmission's torque converter does indeed lock up but the engine provides close to zero compression braking. Service and trailer brakes are your only stopping tools. The PacBrake does integrate with the transmission and I believe it increases lock-up pressure. I do know the tranny will stay locked up to lower speeds when the exhaust brake is on ie. 45 mph in fourth compared to 55mph when off. In my opinion, an exhaust brake is a safety necessity if towing a heavy trailer with that truck in the mountains.
Second tap does indeed turn tow haul off.