There is some discussion of the best location to mount it. My previous trans had factory installed sensor in the pan. (BTY: the designer raced competitively in F1) The reality is that a sensor in the pan will be "good enough". The internals in the trans heat up over time. You don't need a peak reading to know the trans is getting hot. The second reality is, if you are getting too hot, what are you going to do? Run in a lower gear, so there is less slip. This brings the temp down slowly, just as the rise in temp is slow. Is a sensor in the line going to tell you there is a problem sooner? Not really, because the rise is slow enough you will see it anyway.
I would also suggest that most of the time when the trans overheats, it is under conditions where the engine is putting out a lot of heat as well. In other words, most of the time, the root cause of a trans getting too hot is because the engine is hot and working hard, so the trans cooling from the radiator does not cool the trans enough. (that is why the trans has an extra cooler after the radiator.)
Basically if you can cool the fluid, the trans will stay cool enough.
As an additional note, the 4L80e has the internal sensor right after the pump, which means GM thinks monitoring the pan temp is all that is necessary for the computer to make alternate decisions to save the trans.
It doesn't hurt to put it in the cooling line, but the pan is good enough.
