Probably not a bad sensor. Could be a clutch pack slipping, which would explain the extra torque causing the transmission to heat up. I would check the simple things first, like oil level. Low oil level (or high oil level for that matter) can cause overheating for a number of reasons. If the oil is low, the torque converter will not get enough fluid to facilitate smooth shifting up and down all the time. If the fluid level is too high, the oil will actually froth, or foam, up and when this happens, there is air throughout the hydraulic circuits of the transmission which inhibits the cooling ability of the oil and increases friction. Under load, this would definitely cause an overheating situation.
My suggestion would be check that when you cycle the key on, your gauge needle moves up and down again during the gauge sweep, then check your oil level. If you don't have issues with those things, then you could try something like Transmission Medic or some additive that claims to stop slipping transmissions. If you'd rather tackle the job the best way, take it to a transmission shop. They would likely be able to diagnose it fairly quickly and fix it for you. Hopefully this helps a little bit at least.