Put the sensor in the pan, it is what you want to know. The other readings are not useful. If you could read the transmission temp directly that would be best but you can't. The output line is just the torque converter fluid temp and the input line is just the temp out of the cooler and not the average the transmission is sucking up. You should really get a sensor in the pan if at all possible.
As recommended above install the temperature sensor into the pan, not the lines. The temperature of the ATF in the pan is far more important to the transmission than what it is in the lines, that's what the transmission is running on.
The transmission pan is very well protected by the skidplate. There are a lot of us in this forum running a transmission temperature sensor mounted in the transmission pan who spend a lot of time rolling over big rocks where sensor damage is never a problem.
The problem with this is the temperature output of the torque converter when it's generating heat will be easily over 250 so you'd get used to that number. If the torque converter is locked and you are running that same temp you could be in first stage overheat on the transmission. With the gauge on the output you essentially have to guess how much heat is in the system based on how you are driving and not many people are going to be good at that. That's why the output temperature isn't used or recommended by almost anybody. Between the two the transmission pan temp is a more reliable indicator of how much heat the transmission is dealing with. The higher output temperatures from the torque converter are less of an issue because the cooler is much more effective the higher the temperature differences get so the temps dumped back in the pan are often way below the spikes you'd see in the output.
I guess Daimler Chrysler's engineers just don't know what the F they're doing right?
I enjoy the discussion and didn't know that bit about the Cat equipment and where they have the temp sensor. Good info in my book regardless.
Most large equipment manufacturers do the same. Again a TJ is not a bulldozer or a loader. I jumped the gun on all this without a thorough understanding of the concept. Although the TJ and say, a D9 hydraulic control are similar, there are some significant differences in oil flow which I discovered have a great impact on where the oil temp should be measured and why.
