Finally something I can comment on...yeah the tranny goes into limp and increases pressures to try to save the tranny. Runnin it like this will damage it. It will start leavin gears out of the sequence if you go too long

On mine I changed the sensor in the diff but after the speedo still bounced, it went right back to limp. The diff has a trigger ring attached, mine was damaged from a loose ring gear tooth. I went ahead and built the rearend. This trigger ring if flat in any spots will cause speedo/ shift problems