Had same thing and turned out to be the Tach sensor. The 2 wires had started to come loose and after replacing it the tach shows proper RPM. From what I have read replacing the Tach sensor can also fix some hard shifting issues because it shifts based on RPM. Have a project 1990 7.3 IDI I am working on and I havn't gotten to the point I can test that on the road but I had both hard shifting and the tach didn't show proper RPM. It would show zero at idle and would climb to around 1.8k with a light foot on the pedal lol I don't remember the RPM when I floored it.
Thank you rosston, I am aware of those wires and will check them out. They are connected to the wire harness with a slip on connector so it shouldn't be difficult. I always wonder whats under that big nut that the go to. Magnetic?