I've got solutions and recommendations. Installing on the driveshaft was tried by David Lieb and speedo cannot count that many revolutions. Already been tried and proven that it does not work. Use J-B Weld to attach magnet to the drum not one of those 5 minute epoxies. Try and clean the rust off first.
I updated the Magnetic Reed Switch used to activate the the Speedo. Google Hamlin 59125-020. Little Mini Reed Switch in a flat 1/4" thick x 1.24" long x 3/4" wide package including mounting lugs. Good for several million contact closures. $2.95 including similiar sized magnetfrom a local electronic surplus house. Radio Shack did not have anything like that in a suitable package.
I took a simple piece of 1/2 flat bar mending brace the I bolted to the bottom of the spring hanger on the rear wheel. There is a nice solid bolt within easy access to attach to. J-B Welded the Reed Switch to the bracket, I think I added a litle right angle corner brace or two to position the Reed Switch at a close angle to the drum.
As far as cords and vibration, I used a piece of telephone line mounting cord. Designed to be flexible and move around and size of wire is very close to that on the speedo anyway.
Since I was already using a phone mounting cord and it had modular plug on the end of it, I ran that through the tranny tunnel and ended with the phone cord under the dash. I connected another phone cord with modular jack on it(the other end of the phone cord I already had that I cut off to attach to the Reed Switch). Now I put an female to female modualar cord to modular cord connector in there and stuffed up under the dash.
Now for trouble shooting on the reed switch or positioning of the magnet, I can disconnect before it goes into the speedo and with my VOM connected can see if reed switch is opening and closing as the drum/wheel turns. Switch needs to be close enough but not too close or speeds will be inaccurate. Other issue is that axles do move around in and out as you go around corners. So proper positioning of the sensor, just a little trial and error will ensure that speedo stays working on really sharp directional changes. During an Autocross David Lieb noticed as axle moves in and out seppdo would stop reading properly. I pretty much resolved by using the flat magnet that came with the Hamlin Switch. When Speedo does stop working it comes back on a second or so later as axle moves back into normal position.
Wireless - I did research on that and range is only 24" according to the manual. That won't work for us.
Re. Lighting at night. Was in Autozone over the weekend and they sell little mini blue LED Directional lights that run on 12VDC. One setup featured 2, I'd only use 1 LED that mounted in a directional housing fastened with double sided tape. Was like 1/2 wide / 1/2 high. Little bitty thing that could stick on top of dash where I've got my SIGMA 1200 mounted, could be rotated and aimed, and provide light at night. In fact this could sit in the curve of the padded dash, be switched to only work when ignition was on and provide light at night. Lord know Spridget instruments are not the greatest and even after updating, repainting inside of cans white, seeing the speedo and tach at night is not easy. That's a real simple solution and you don't need to worry about night time lighting.
Hope this helps.