When the TC is in a high slip region, it can multiple torque. As input and output speeds match up, any multiplication goes away. As they say, there's no such thing as a free lunch.
That said, slip makes heat, and any heat that is going out a heat exchanger = heat not being used to drive the wheels. Lock up TC's weren't needed until final drives got really steep, then engine rpm dropped down to where the TC wasn't above the stall speed. That made heat and translated into loss, thus the lockup (made worse with overdrive working against tall rearends).
So unlocked TC's cost mpg. But even then... the engine still has to drive the pump that the AT needs in order to do all its shifting and stuff. There's no winning.
Back when MT and AT's kinda coexisted, it seems to me that MT's had one more gear than the AT's had. 2 speed autos with 3 speed manuals. Then 3 speed autos and a move towards 4 on the floor. Eventually 4 speed autos and 5 speed manuals. Give or take, that is. The MT needed an extra gear as that TC slip & torque multiply feature was pretty big. Today's automatics are just trying to get wide spread but tight ratios so as to mimic a CVT.