Done.... again!
Ok so… on my first attempt I had decided to play around with modifying the transfer case output housing because if I screwed it up I would have been out way less money as opposed to the Allison rear cover. However, it was way easier to modify the 4x4 Allison 1000 rear housing to accept the speed sensor.
Now armed with the knowledge that the different reduction ration between the np-261/263 vs. the np-205 would cause the transmission to fail when operated 4-low my new approach was to find a spot to put the speed sensor somewhere between the transfer case input and transmission output. After doing a little thinking the obvious choice would be to attach the exciter ring on the stub shaft and the best place on my application to mount the speed sensor was to go through the transmission rear housing.
I acquired another exciter ring and had it machined to fit on the big end of the stub shaft with a 0.002 interference fit, so that it will not need any bonding agent to stay put. Note: the exciter ring is cast iron, or at least mine was, so care needs to be taken when pressing it on as to not break it. Then I chose a place on the rear hosing that was out of the way of anything important and on the top portion to help reduce the chance of any leaks. Once I decided where to drill I carefully drilled the hole freehand. The speed sensor I used is for a 2001 2500hd, see below pic for part number. Drill bit required is 51/64 and tap is M22x1.5. With the hole drilled and tapped it was just a matter of finding the right thickness washer to get ~0.40 clearance between the sensor and exciter ring, oh and a little bit of silicone.
I decided to leave the other sensor in the transfer case output housing since it was already there and the sensors are cheap. Plus if one fails the other will get me home
speed sensor box with part number
stub shaft/exciter ring and speed sensor
exciter ring/stub shaft and speed sensor installed
speed sensor mounting position
final assembly