I had one installed when my T400 was rebuilt
Yes, you can cut a hole in the pan and weld a backing nut in the back of it, but it is fairly easy to warp the pan in the process or have a less than leak proof fit. That is the method I'm using for the oil temp sensor I am shortly to install. I hope to use the filler or the drain plug hole for the temp sensor in the differential.
My tranny shop preferred drilling and tapping a hole in the casing and putting the temp sensor in from the top since the tranny was out getting a rebuild and having an electronic sender attached too. On the T400 there is a convenient flat point on the same side as the speedo sender.
Mine both go to digital gauges from Nordskog. I have noticed the tranny typically runs at 165-175 until I get it to real speed, when it goes as high as 195. We're only in late spring here, with daytime highs in the 80's and I've already seen over 200 a few times on the trans temp gauge. I am curious to see what the summer with 105 and 110 (and 150-170 on the road surface) will yield. I am adding an extended capacity pan with my coming engine upgrade, it will be interesting to see what that does too. Interestingly it takes a good 15 minutes of hard driving to get it up to normal operating temp.