Yes; it's most certainly for the speedo sensor. There should be a retaining clip/bolt to hold it in there.
Like this:
If my memory serves me correctly it's the fluid level sensor. It was added in later years but I don't remember off the top of my head when. If your trans doesnt have it then it must be an earlier one. Someone else might be able to chime in when it was added.
It is a speedometer sensor and with the AODE one you can cut about a 1/4 inch off the tip and it will fit in just fine.
You do know that there is no driven gear that will work with the 4:10's unless the drive gear has been changed to a 6 tooth gear. See this page from the FRPP catalog for your options. I see it doesn't redirect. Go to page 173 in the catalog.