[RIDE-RED 350r]

This may or may not be of any help to you other than to confirm whether or not you have an issue to resolve...

But, my truck has a 350, SM465 4-spd (1.00 ratio in 4th gear) coupled with NP205 T-case (same as you). I am running 35" BFG Mud Terrain HM2's pushed by 3.73 gears. My truck turns just about dead on 2400 rpm at 60 mph... About 1800-1900 rpm at 40 mph.

You are definitely geared lower than I am with rubber and gears... But a 1000+ RPM difference at 40 mph?? That seems like quite a difference...

I am no transmission expert.. But just based on seeing others get help from those who know their stuff when it comes to transmissions, I would be wondering if your converter is is failing to lock up in 3rd????

I may be able to work some numbers into a spreadsheet a member hooked me up with to see what RPM you should be turning on paper....