Variable reluctance sensors need a clean sharp edge to make a clean sine wave. With your tone ring design I'd expect the " zero crossing " voltage to rise with increased speed and eventually be higher than the trigger point of the speedo. RE: I'm expecting the sides of the open window area to still have an effect on a VR sensor, a sprocket design would be better.

Early Sprinters supposedly used a sensor in the rear of the trans for road speed. The casting hole is there however you would have to dissemble the trans to drill the case and I don't know what the tooth count is.

Making the ring from 4140 is probably overkill, measure the hardness of the output flange and adjust accordingly. I'd expect mild steel to be just fine.

Powder coat is just plastic so over time I'd expect it to cold flow and bolts lose some tension. Depending on the sensing range of you hall effect, a layer of power coat might take you out of range. A VR sensor needs tight clearance so I'd expect that to be even worse.

Regardless, I tend not to like power coat in a corrosive environment and prefer paint because paint tends to have better adhesion. Paint will slowly peel as the base metal rusts where as powder coat comes off in sheets due to rapidly advancing corrosion.