I did some additional driving tests this evening in a business park. It does appear that 2nd gear exists, but engine rpms are "racing" and not adding any additional speed over 1st. Staring off with the gearshift in 2nd and depressing the gas to reach 4000rpm only gets the vehicle to 25mph.

Starting off with gearshift in 1st and reaching 4000rpm gets the vehicle to 25mph, and then shifting the stick up to 2nd drops the rpms down to about 1250. Depressing the gas pedal and accelerating to 4000rpm in second does nothing, it immediately races like its in neutral. Shifting to 3rd (D) at 25mph@4000rpm will upshift to 3rd gear.

Performing high rpm and shift tests causes the temperature gauge to drop out from "N" to below the low mark once in 3rd gear.

With this info in mind, would you say bad transmission or sensor?