More research, and I believe that line goes to the fuel cooler, and that I can by-pass it until I an sure that the engine and transmission are in good enough shape to save the car.
Picture of the kinked hose end:

Also 2 pictures of the "found" sensor" from different sides

Attached Thumbnails

     

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1982 300SD " Wotan" ..On the road as of Jan 8, 2007 with Historic Tags