It's possible there are two. The one in the side of the trans would be the output speed sensor. Your truck may, or may not... have one. If it is in the tailhousing of the trans, or transfer case if you have a 4x4, that's the vehicle speed sensor.

 

You might want to remove the housing and change the o ring. But before you do mark the position of the housing. It turns so you can mesh the gear.

 

You wouldn't happen to know if it is an o-ring that is not a special order or readily available. I've asked my local auto parts stores and it seems to end in do you have a part number. I just can't see my self trying to go to my local dealership knowing that I am going to get an even worse response from them. Haven't been able to find anything that resembles the housing on the online stores either. I guess that is the joy of owning a 30 year truck, and im going to try and hold on to it for as long as I can.

 

You can download the parts manual for your year truck via the link below. You can search for the housing and O-ring in it, along with the part numbers. Once you have the part number, Google is your friend. I'm sure the O-ring is still available.

1994-1996 Truck including Dakota
https://docs.google.com/viewer?a=v&p...thkey=CKzqo-oB

 

O-ring is just a... o-ring. If you can't find it with a part number, pull the parts and measure the o-ring. Hydraulic shops have a good selection of o-rings.

 

The o-ring in the rear diff is a smaller rope dia than readily available at auto parts places. A hydraulic shop might have it as suggested