I wanted to post the solution to my issue. The more solutions everyone has, the better off everyone will be when diagnosing their issue. However, let me also say that there CAN be multiple solutions to the same problem(s). So this may or may not be YOUR problem.
I was experiencing the following with my 2007 Tahoe two weeks ago:
Stabilitrak OFF light on
Service Stabilitrak notification
Service Traction Control notification
Check Engine light on
Hard shift from 1st to 2nd gear
Long story short, I'm a decent mechanic, but I'm in the Coast Guard and am currently deployed in Afghanistan. This happened while I was home on my two-week vacation, and I didn't have time to fool with it. So I decided to take it to the dealer.
NOTE: ALWAYS request your old parts when having a mechanic work on your vehicle. SOME of these places, as you may know, will take advantage of you.
My problem ended up being a bad exhaust lifter on the #1 cylinder. The spring had seized and was not operating properly. See the picture, and notice the one lifter that doesn't look like the others.
Don't fool yourself. A problem like this CAN cause ALL of the symptoms I listed above. Vehicles these days are ALL electronic and everything is computer based. When one problem occurs, it can cause a plethora of other problems.
Lifter replacement is not a basic endeavor. The cylinder head has to be removed for starters.
It's not cheap either. It cost me $2,150. However, the good news is, my vehicle was repaired in 48 hours and was back to being a dependable vehicle for my family, prior to my return to Afghanistan. Sometimes a peace of mind is worth the cost.
Good luck