Mine just started doing something similar.
Check TOD light will flash, then go off as all 4 wheels on display flash 100% a few times, then check TOD flashing again.
It did this about a month ago at the beach while in 4 hi, so I put in 4 low rest of beach driving and it hasn't come back on until just last night.
Also, sometimes it works fine. Your suggestions sound right for my case, either bad connection or faulty sensor.