I'm guessing this pertains to the 4 speed non electronic controlled trans correct? Was there a 5 speed non electronic? ( My 97 sl320 has a 5 speed electronic shift with a Winter 2nd gear start / Sport 1 st gear start switch )

Some things to consider:

Build a bit of hystereses into the controller otherwise it might toggle if you drive at switching speed.

The KD solenoid might not be rated for continuos duty, adding current limiting ( pulling the voltage back, peak and hold ) or running PWM would help the situation. Finding a donor solenoid and running it at 14.7 V ish at over 200*F would be a good test.

The factory 1st gear switch sounds interesting, a look at the wiring diagram would be a good idea.

Moving the shifter to 2nd / 1st to engage 1st start sounds interesting and , if the trans is hydraulic controlled, you might only need to pulse the KD sol.

Anyone have a hydraulic diagram / apply chart of the trans in question?

Also a pressure chart is needed, the non factory 1st switch units might not have enough line pressure at light throttle to prevent slippage.

MSD makes a speed ( frequency ) operated switch as does Murphy. I've used the Murphy unit on industrial diesel engines that needed overspeed shutdown. ( diesels that work in a refinery / gas / oil well area need a overspeed air intake shutdown down because if there is a flammable gas leak they will run away. )