The gear shift indicator light in the instrument cluster shows that the transmission is in 3rd gear at all times once the ignition switch is turned to the on/start position even when the transmission is actually in park or any other gear position. The transmission works as it should do when driving and shifts up and down the range as normal but the light on the cluster never moves from the 3rd gear position. I have changed the park/neutral switch but this did not fix the problem.

Could be a number of thing's ? The electronic's on your vehicle are very complex ,taking to a qualified repair shop an having it checked for DTC'S - diagnostic trouble codes would be your best bet . The internal mode switch as it is called ,is a input to the PCM - engine computer . The PCM sends the gear position over the class 2 serial data network to the instrument cluster . The instrument cluster has a microprocessor inside which will use this info to select correct gear position . Replacing parts that will not fix the problem isn't the way to a fix. Knowing GM vehicles an the problems they had with instrument clusters from 2003 to 2006 ,i would suspect that as being the problem . Having a professional type scan tool an checking for DTC'S in the instrument cluster as well would be the first step to do.

The transmission internal mode switch (IMS) is a sliding contact switch attached to the selector detent inside the transmission side cover. The 4 inputs to the PCM indicate the position of the transmission range selector. The input voltage level at the PCM is high, B+, when the IMS is open and low when the switch is closed to ground. The 4 input parameters represented are Signals A, B, C and P, Parity. Refer to Transmission Internal Mode Switch Logic .
Before replace parts ,hooking up the scan tool
Install a scan tool.
Turn ON the ignition, with the engine OFF.
Select IMS on the scan tool.
Place the range selector in each transmission range: P, R, N, D4, D3, D2 and D1.
Does each range selected match the scan tool IMS display?

At the dealer we test ,not guess .

Did you perform the Instrument Cluster Diagnostic System Check?
--
YES - Go to Step 2
NO - Go to Diagnostic System Check - Instrument Cluster
2
Turn OFF the ignition.
Install a scan tool.
Start the engine.
Place the gear shift lever in the following gears:
• PARK
• REVERSE
• NEUTRAL
• DRIVE
Observe the Transmission Range parameter in the powertrain control module (PCM) data display.
Does the scan tool indicate that the Transmission Range parameter is the same as the PRNDL display for all gears?
YES - Go to Powertrain On Board Diagnostic (OBD) System Check Engine Controls - 3.8L
NO - Go to Step 3
3
Replace the instrument cluster. Refer to Instrument Cluster Replacement .
Did you complete the replacement?

An Electronic Stability Program (ESP)/Brake Assist System (BAS) indicator is standard equipment on all instrument clusters. The ESP/BAS indicator is serviced as a unit with the instrument cluster.
The ESP/BAS indicator gives an indication to the vehicle operator when the Electronic Stability Program (ESP)/Brake Assist System (BAS) has been activated. This indicator is controlled by a transistor on the instrument cluster circuit board based upon cluster programming and electronic messages received by the cluster from the Controller Antilock Brake (CAB) and the Transmission Control Module (TCM) over the Controller Area Network (CAN) data bus.
The ESP/BAS indicator Light Emitting Diode (LED) is completely controlled by the instrument cluster logic circuit, and that logic will only allow this indicator to operate when the instrument cluster receives a battery current input on the fused ignition switch output (run-start) circuit. Therefore, the LED will always be OFF when the ignition switch is in any position except ON or START. The LED only illuminates when it is provided a path to ground by the instrument cluster transistor. The instrument cluster will turn ON the ESP/BAS indicator for the following reasons:

1. Bulb Test- Each time the ignition switch is turned to the ON position the ESP/BAS indicator is illuminated for about four seconds as a bulb test.
2. ESP/BAS Indicator Lamp-On Message- Each time the cluster receives an electronic ESP/BAS indicator lamp-ON message from the CAB indicating that the ESP/BAS system has been activated, the ESP/BAS indicator will be illuminated. The indicator remains illuminated until the cluster receives a lamp-OFF message from the CAB, or until the ignition switch is turned to the OFF position, whichever occurs first.
3. ESP Full Off Textual Message- Each time the cluster receives an electronic ESP Full OFF indicator lamp-ON message from the CAB indicating that the ESP/BAS system has been manually disabled, an ESP OFF textual message will appear within the cluster odometer display. The ESP OFF textual message remains displayed until the cluster receives a lamp-OFF message from the CAB, or until the ignition switch is turned to the OFF position, whichever occurs first.
4. Actuator Test- Each time the cluster is put through the actuator test, the ESP/BAS indicator will be turned ON, then OFF again during the bulb check portion of the test to confirm the functionality of the LED and the cluster control circuitry.

The CAB continually monitors the ESP/BAS circuits and sensors to decide whether the system is in good operating condition and the proper outputs to the components of the system. The CAB then sends the proper lamp-ON or lamp-OFF message to the Electro Mechanical Instrument Cluster (EMIC) (also known as the Cab Compartment Node/CCN).
For proper diagnosis of the ESP/BAS system, the CAB, the TCM, the EMIC, the CAN data bus or the electronic communication related to the ESP/BAS indicator operation a diagnostic scan tool is required. Refer to the appropriate diagnostic information.

PRND321 Display
The instrument panel cluster (IPC) displays the selected gear position as determined by the engine control module (ECM). The IPC - instrument panel cluster receives a serial data message from the ECM indicating the gear position. The PRND321 display blanks if:
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The ECM detects a malfunction in the transmission range switch circuit.

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The IPC detects a loss of serial data communications with the ECM. The automatic transmission shift lock control system is a safety device that prevents an inadvertent shift out of PARK when the engine is running. The driver must press the brake pedal before moving the shift lever out of the PARK position. The system consists of the following components:
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The automatic transmission shift lock control solenoid

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The automatic transmission shift lock control switch

With the ignition in the ON position, voltage is supplied to automatic transmission shift lock control switch. Voltage flows through the normally closed contacts of the automatic transmission shift lock control switch to the automatic transmission shift lock control solenoid. The automatic transmission shift lock control solenoid is permanently grounded. This energizes the automatic transmission shift lock control solenoid causing the transmission shift lever to be physically locked in the PARK position. When the brake pedal is pressed the contacts in the automatic transmission shift lock control switch open, de-energizing the automatic transmission shift lock control solenoid. This allows the shift lever to be move out of the PARK position.
The transmission range (TR) switch is part of the park/neutral position (PNP) and backup lamp switch assembly, which is externally mounted on the transmission manual shaft. The TR switch contains four internal switches that indicate the transmission gear range selector lever position. The PCM supplies ignition voltage to each switch circuit. As the gear range selector lever is moved, the state of each switch may change, causing the circuit to open or close. An open circuit or switch indicates a high voltage signal. A closed circuit or switch indicates a low voltage signal. The PCM detects the selected gear range by deciphering the combination of the voltage signals. The PCM compares the actual voltage combination of the switch signals to a TR switch combination chart stored in memory.
You need a Tech2 scan tool to diagnose this problem ! possible range sensor !

I am assuming that your shift lever is on the steering column. Either the bulb for indicator has burned out or the shift indicator switch on the transmission has failed. There are 3 different engine options for this truck and 3 different transmissions. I would need to know which engine and transmission your truck has, to give better info. FYI, you have to remove the instrument cluster to replace the bulb, assuming that is the problem.
Charlie

With the instrument cluster pulled ,but still connected to electrical connector , Check B+ voltage an ground's . Loaded circuit testing , do you know what that is ? Video's on youtube .An do you know where the gauges get there info. from ? The instrument cluster is hooked to the class 2 serial data network , this is a communication network for the control modules . PCM / ECM - engine computer , BCM - body control module , SRS , air bag module , ABS , etc.... They all share info. on this network .
Fuel Gauge
The fuel gauge is an analog device that is located in the instrument cluster. The instrument cluster operates the fuel gauge by the class 2 serial data messages from the VCM/PCM. The fuel gauge indicates the quantity of fuel in the tank when the ignition switch is in the RUN position. When the ignition switch is turned to the OFF, LOCK, START, or ACC position, the pointer may come to rest at any position.
The VCM/PCM measures voltage from a variable resistor inside the fuel tank that is controlled by a float. When the fuel tank is full and the ignition switch is in the RUN position, the resistance is high. The VCM/PCM interprets this signal and sends a message to the instrument cluster indicating the percentage of fuel in the tank over the class 2 serial data line. The fuel gauge indicator then moves to the maximum position or FULL on the gauge face. When the fuel tank is empty, resistance is low. The VCM/PCM interprets this signal and sends a class 2 serial data message to the instrument cluster. The fuel gauge indicator then moves to the minimum position or EMPTY on the gauge face. Failures detected by the PCM/VCM in the fuel gauge signal sends the gauge to EMPTY.

PRNDL Indicator (Park Reverse Neutral Drive Low)
The PRNDL display is a class 2 serial data message to the instrument cluster from the PCM/VCM. The PRNDL display is a vacuum florescent (VF) display which displays the fixed gear position of P, R, N, D, 3, 2, 1 surrounded by a moveable square flag in order to indicate the selected gear position. The position of the moveable square flag is sent to the instrument cluster from the transmission range switch over the class 2 serial data line. The transmission range switch and the neutral safety back up (NSBU) switch operate separately but are incorporated into one part. If the vehicle is equipped with a column shift steering column it will also have a park position switch. The park position switch (if equipped) must also be CLOSED in order for the instrument cluster to display the PARK position. Since the system is entirely electronic, there is not any internal adjustment. The PRNDL display will operate as follows:
• The PRNDL display will display the PARK position when a class 2 serial data message is received from the PCM/VCM indicating the transmission is in the PARK position and for vehicles which have a column shift on the steering column, the park position switch must also be CLOSED (low input).
• The PRNDL display will display a gear position if a class 2 serial data message from the PCM/VCM is received indicating the gear position of the transmission.
• The moveable square flag will not appear on the instrument cluster in order to show no gear was selected when the instrument cluster does not receive a class 2 serial data message from the PCM/VCM within 5 seconds of entering the UNLOCK or the RUN position.
Refer to Engine Controls or Transmission/Transaxle for more information about the PRNDL indicator.


Hooking up a GM tech 2 scan tool an checking for DTC'S - diagnostic trouble code's would be a good first step in the diagnostic procedure .
Data Link Communications Circuit Description
The serial data line is the means by which the microprocessor controlled modules in the vehicle communicate with other control modules and the scan tool.
The control modules on the class 2 data line are as follows:
• Body control module (BCM)
• Instrument cluster (IPC)
• Automatic transfer case (ATC) control module
• Vehicle control module (VCM)
• Powertrain control module (PCM)
• Inflatable restraint sensing and diagnostic module (SDM)
• Electronic Brake Control Module (EBCM)
• Suspension Control Module (SCM)
• HVAC Control Module

Your best bet mite be to take it to a qualified repair shop .

You will need to replace the indicator, this is controled by a cable that connects to steering housing,it sounds like it broke or came loose,good day

You have a electronic Shift indicator switch on your transmission this is also called th NSBU switch. This is what tells your instrument cluster what gear you have selected. This may be your problem. or you may have a loose or bad connection. NSBU stands for neutral safety Back up switch.

one hour job. find bulb part number in bulb chart in owner manual.

go here for villager help.

http://groups.yahoo.com/group/villagerquest/

Section 13-01B: Instrument Cluster — Conventional 1996 Villager Workshop Manual
REMOVAL AND INSTALLATION Instrument Panel Finish Panel Removal

1. Disconnect the battery ground cable (14301).
   

1. Block the wheels (1007) to prevent the vehicle from moving.
   

1. Turn the ignition switch (11572) to the OFF position.
   

1. Shift the transmission range (TR) selector to MANUAL LOW (1).
   

1. Tilt the steering wheel (3600) to the lowest position, if equipped with a tilt wheel.
   

1. Remove the two instrument panel finish panel screws.
   

1. Remove the instrument panel finish panel (044D70) enough to access the switch electrical connectors.
   

1. Disconnect the rear windshield wiper/washer switch electrical connector.
   

1. Disconnect the heated back window and light switch electrical connector.
   

1. Disconnect the emergency warning switch electrical connector.
   

1. Disconnect the SECURITY indicator light electrical connector.
   

1. Disconnect the speed control on/off (CRUISE CONT. ON/OFF) switch electrical connector.
   

1. Disconnect the headlamp switch electrical connector.
   

1. Disconnect the autolamp/light switch rheostat resistor electrical connector.
   

1. Remove the instrument panel finish panel with the switches attached.
   

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Instrument Cluster
Removal

1. Disconnect the battery ground cable (14301).
   

1. Block the wheels (1007) to prevent the vehicle from moving.
   

1. Turn the ignition switch (11572) to the OFF position.
   

1. Shift the transmission range (TR) selector to MANUAL LOW (1).
   

1. Tilt the steering wheel (3600) to the lowest position, if equipped with a tilt wheel.
   

1. Remove the two instrument panel finish panel screws.
   

1. Remove the instrument panel finish panel (044D70) enough to access the switch electrical connectors.
   

1. Disconnect the rear windshield wiper/washer switch electrical connector.
   

1. Disconnect the heated back window and light switch electrical connector.
   

1. Disconnect the emergency warning switch electrical connector.
   

1. Disconnect the SECURITY indicator light electrical connector.
   

1. Disconnect the speed control on/off (CRUISE CONT. ON/OFF) switch electrical connector.
   

1. Disconnect the headlamp switch electrical connector.
   

1. Disconnect the autolamp/light switch rheostat resistor electrical connector.
   

1. Remove the instrument panel finish panel with the switches attached.
   

1. Remove the four instrument cluster screws.
   
2. Remove the transmission range indicator (7A110) from the instrument cluster (10849).
   

I would say its your Ignition switch or the fuse for tranny is blown or the tranny is unplugged.My truck had a problem where it was stuck in third gear, the tach never moved,the gear indicator light went out.I left it at the tranny shop all day and nobody could find the problem.All you need to do is check your fuses with a test light.I looked at all my fuses and they were all good but when I used a test I found that some fuses didnt have power supplied to them from the ignition switch.Your fuses need power on both sides to complete that circiut.So I would say go get a test light because they are cheap and check your fuses before you go right back to the parts store for that ignition switch.Good Luck