Thank you guys for quick reply.
(ShawnMThe VSS detects wheel speed and sends the signals to the ABS ECU. The ABS ECU converts it to a 4 pulse signal and sends it to the instument cluster. The cluster then converts it to a more precise signal then outputs it to the ECM. So its not really that theres another sensor in the cluster, its just that the cluster has a role in relaying the speed signal to the ECM. I have yet to see a toyota instument cluster go bad like this, but i suppose it is possible. As I have never replaced one im not sure if they have to be reprogramed, but my guess is it probably would have to be.)
Yes, I understand that how it works. One think I don't understand is what VSS sensor the dealer was talking about in cluster? Thats what doesn't make sense to me.
(csaxonlosha64, I'm sorry for the confusion.
The A541E
had 2 vss's (1 gear drive, 1 direct clutch speed sensor)until the 2000 Avalon was introduced.
In 2000 the Avalon dropped the gear drive and kept the direct clutch speed sensor. It operates as ShawnM describes "converting pulses to speedometer readings".
A simple test of the speed sensor is to remove it and test the resistance (560-680 ohms).
Then test voltage by putting a magnet close to the tip up down or side to side. You should see low voltages generated.
I plugged a new cluster in a'99 without problem. The odometer read 0's because the cluster was new.
You may want to do the twist/push/and pull of the wiring and connectors including the cluster wiring.
Good Luck!

)
Thats what they said that the VSS that I replaced was for drive clutch not for speedometer. But when I was getting Vehicle Speed Sensor at dealer parts service there was only to options Wheel Speed Sensor (WSS) or Vehicle Speed Sensor (VSS) the one I got was VSS and the guy at parts even printed out where it exactly goes, on top of transaxle strait down by starter.
I'm having hard time believing what dealer is telling me.