When using the 7427, you'll need a '94 or later 4L80. The '91-93 have a force motor that isn't compatible and would need the '7060 ECM instead. The 4L80 uses two speed sensors (Input Speed & Output Speed). The forward sensor on the transmission is the input speed and the aft one is output. I'm not an expert on them, but I believe you could use either the one on the transmission (assuming it has one, could be blanked off on a 4x4) or the one on the T-case for output speed.

The speedo output will come off of the VSSB (Vehicle Speed Sensor Buffer). Your '87 probably has a DRAC(instead of VSSB) built into the gauge cluster, I don't recall if that year has a cable drive speedo, but if it does, you'll want to swap it with an electronic speedo. If it's already electronic, there might be a way to use it with the signal from the VSSB, but I'm not sure.