This is by Steve83 for Posterity and to help make it clearer;
"~'85-91 used a t-case mounted VSS (6 pulses per cable rev) for cruise and E4OD shifting. The ABS sensor was only used for RABS. The ESOF t-case always had its own dedicated speed sensor in the tailhousing...
...VSS used on '87-91 trucks for cruise & E4OD applications. Used on some vehicles as an OSS. The VSS goes at the front of the rear driveshaft, either in the trans or t-case tailhousing. The early version accepts a speedometer cable at the back end (R in the diagram). The previous style of VSS hung in the middle of the cable: http://fullsizebronco.com/forum/showthread.php?t=86948&page=2
Operational Description, pic & Parameters; this describes pre-92 years where VSS is mounted in transfer case tail housing
Source: by Ryan M (Fireguy50) at http://web.archive.org/web/20101201014106/http://fordfuelinjection.com/index.php?p=33
excerpts; "...The Vehicle Speed Sensor (VSS) is a small signal generator that is turned by a gear inside the transmission assembly. The Vehicle Speed Sensor produces 8 pulse per rotation which a stock computer assumes 8000 pulses per mile. The Vehicle Speed Sensor (VSS) is a variable reluctance sensor that generates a waveform with a frequency that is proportional to vehicle road speed. When the vehicle is moving slowly, the sensor produces a low frequency signal. As the vehicle speed increases, the sensor produces a higher frequency signal The Vehicle Speed Sensor (VSS) supplies this signal to the components that require vehicle speed information including the speed control amplifier for cruise control equipped vehicles and computer..."
Steve83 I am aware a different truck would be the cheaper route, but this was my dads truck and he passed away 2 years ago. He loved the truck so there is some sentimental value to it that I couldn't replace.