The VSS is driven off the Governor. The Governor does have a valve in (below) it. It's possible it could be leaking. I'd still be inclined to think the passanger side axle seal was leaking. Those seals can leak alot and still leave the axle looking pretty dry.
If you have to mess with the governor, be very careful or you can hose the whole trans. Damage to the governor will screw up shifting.
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Dr. Ian Malcolm: Yeah, but your scientists were so preoccupied with whether or not they could, they didn't stop to think if they should.
(Jurasic Park)
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