Thanks kindly MB Doc,

According to the information I have , P0730 series codes are
P0730 Incorrect Gear Ratio
P0731 Gear 1 Incorrect ratio
P0732 Gear 2 Incorrect ratio
P0733 Gear 3 Incorrect ratio
P0734 Gear 4 Incorrect ratio
P0735 Gear 5 Incorrect ratio
P0736 Reverse incorrect gear ratio

I agree with you that a slipping clutchpack would cause a change in the RPM ratio between in put and output shaft. This may cause the TCM to report that the gear ratio is incorrect.
However, as I mentioned in my posting, I monitored the live sensor readings for N3 and saw them go to 0 at times. This was with the transmission in 5th gear and not much torque applied. That is why I started pursuing the RPM sensor path.

Do you happen to know if the axial play I have observed on the encoder wheel for N3 is normal or excessive?