For anyone looking to do this swap, I helped a buddy convert his AWD 2002 4.6 Explorer to M5OD-R2 5 speed and a electronic 4406.
Initially we used information in this thread and elsewhere to hook up some LEDs to the motor position lines, and a DPDT toggle for the motor. It worked, but it was finicky and shifting while driving was out of the question. jds3403, you are close with the signals from the position sender, but not quite there. There is no single wire that says what position you are in, it's a combination of 2 wires on, 2 wires off for each position. These wires can also give you mid-shift positions, and the edges between each position.
Here's a link, about halfway down the page is a table showing position data
Now I've developed a circuit board that allows proper shifting (on the fly even), custom LED indicators, and allows the use of the original Ford 4x4 switch (the 02 switch isn't rotary, its 3 buttons all linked to one wire).
02+ switch:
Anyone who is interested, I can share my designs and you can make the board. It cost me $40 for 3 boards, plus about $66 for the components on the boards, so the cost to make this for yourself is around $35 (if you can make only one).
I had to order a minimum of 3 boards when I had them made by a PCB company, so I've got two extra that I may try to sell here for cost, but I'm not sure if it's worth paying to become an elite member for just those two.
You connect 12v, GND, and the two motor connections to the 4 big solder pads at the top, and then hook up your signal wires (switch, position sensors, LEDS) to the 10 pin header in the lower left. Logic is provided by a 5v Arduino Pro Mini ($10, included in the cost calculations above)
I haven't added the programming yet, but it's possible to add VSS input and lock out transfer case shifting based on speed. Or add brake pedal input and do the same. The Arduino is upgradable, takes a few seconds to update it's programming. I have the sketch available for anyone interested in making one of these also.
It would be very easy to add support for the older rotary 4x4 switch, if anyone wanted to use this in an older Explorer.