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I don't think there's any way to test the VSS, but you may just want to check to make sure the connections aren't dirty or corroded. It should be located on the transmission- just trace the speedo cable back and it should hook right into it.
The VSS on my '96 is located on the rear differential. You don't mention if your truck is an automatic or a manual trans, but if it is an auto, and you're noticing the truck dropping out and back in to OD, that's a pretty good sign it would be the VSS.
The VSS sensor is mounted on top of the rear end.
You test it by putting a volt meter on the the wires going to it at the RABS Data Link Connector under the hood and slowly increase speed to 30 miles per hour. Check to see if the voltage goes from zero to 3.5 AC volts smoothly.
From the shop manual:
NOTE:
Only wiring harness end of connector is to be probed.
Connect Digital Volt-Ohmmeter to Pin 4 (speed in +) and Pin 5 (speed in -).
Does the voltage increase smoothly and continuously from 0 to approximately 3.5 volts as vehicle speed increases from 0 to 48 km/h (0 to 30 mph)?
RABS Data Link Connector is the ABS Test Plugs in the diagram below: