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Mine is designed differently than what you've posted AuroraGirl. Your Speed sensor mounts directly to the casting. The speed sensor on my tranny mounts first into a black plastic housing that itself sits in the casting of the transfer case. Where the tip of the yellow arrow is on my pic above is the seam between the plastic "housing" and the transfer case itself.
Do you know what kind of transfer case you have? There are two main types, the Borg Warner 1356 fixed yoke or slip yolk, and there is a Borg Warner 1345, rla2005 showed you a picture of his BW1356 Fixed Yoke, mine is similar to his: BW1356 Slip Yoke.
I looked online at some BW1345's for the 1988-1991 trucks and could not find any with the plastic bushing like yours.
If you post another picture of your transfer case try and get the whole thing so i can help you identify what you have. Also while your down there look for a little metal tag, should be attached to one of the bolts that holds the transfer case together. If you can't find it, no big deal.
You could try to remove that piece of conduit and do some fab work, try grinding the sides down and and bending it a bit so the conduit slides into the hole on the bracket for the speed sensor. It's not a perfect fix but It should stop it from spinning: good enough till we figure out what flavor of drivetrain you got from FORD.
Cheers!
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