check this out on page 6 (it`s from toyota but jus to give you an idea on where it`s located…………………..

Both sensors are on top of ******. If bad they will code and give a default gear range. If the input sensor fails the ecu looks at engine rpm. if the output fails it defaults 2nd gear. the input sensor is located near engine side of trans.

These sensors do go, your mechanic would have noticed if the wires where cut or loose, I believe it is in the ****** on this car and I would not recommend a used sensor here.

Try adding some lucas oil ****** additive to your ****** oil, I know it sounds silly but this stuff works miracles on older transmissions and its only 15 bucks. You should notice a change in days if it works and if it doesn't you really only wasted 15 bucks and have to get a new sensor.