Would an accurate test for a 1998 Audi A4 be to remove the sensor and use a permanent magnet to check for the "switch" to open and close? If not, can you suggest a good test(s) for the sensor?

Also, what voltage should I read on wires to sensor, if any?

My speedometer steps to 160 regardless of speed and will stay until ignition is turned off and then steps back to 3 MPH and stays until ignition is turned on again and car is driven.

Any input would be greatly appreciated. Thanks

 

Although I dont know what the correct reading is, usually you would use a multimeter to test the ohms between specific pins on the sensor's connector.
This may be in the bently manual, I have never looked for the specs. One friend here, Dave, has some pretty nice software that has just about anything in it, he might post the correct readings if you ask him nicely.....
Its locatedsomewhere near the top of the tranny. Good luck!

 

The first thing is to grab someone with a vagcom from the useful links section, and run diagnostics and output tests on the instrument cluster. This will help pinpoint the issue. Failing that the first thing to check is that all the connections on the back of the cluster are making conact.