I have been dealing with a bouncing needle the last few weeks. Here are my suggestions.
Pull the cable off the back of the speedo, get it down to where you can see it and watch it while you drive the truck forward and backward. If it moves nice and easy without noise, then time to pull the speedo out of the dash to clean, oil and check for broken parts by putting it in a drill and carefully spinning it up. It should be a steady speed with the drill running after a few seconds to get stabilized. If not, keep cleaning and oiling until it does.
Remember to disconnect your battery cables before you pull the gauge cover off. That volt meter is hot and will short out blowing at least 1 fuse and maybe more harder to fix damage.
The speedo itself can be pulled without pulling the gauge cluster. I did mine just last night that way. I figure the fewer times I mess with the electrical plug on the back of the cluster, the less likely it is to break off a contact tab, again.
I would also suggest you pull the cable off the t-case and twist it by hand if the cable has proven to be still one piece. Unhooked from the speedo, it should spin free and easy. If you feel it winding up or binding, pull the insert out through the cab end. Have on clothes you can get greasy because that cable will wip around and find clean spots with great accuracy. Use a rag to clean the insert as you pull it. Check for burrs, twisted spots and any shiny spots. If it looks good, oil it with something lite. I have found a fondness for bicycle chain oil in aerosol cans for this kind of work.
Obviously, if you find something wrong figure replace it. A shiny spot indicates a smashed cable housing meaning it needs to be replaced as well.
If everything looks good, you put it back together and the darn thing still jumps. Then if you have a M1009, it is time to pull the gear reduction box off the tcase and try to get some oil into it. Not very easy since the thing is sealed at both ends and held together with rivets. Lite oil will seep in if your patient though. Keep turning it by hand until if feels smooth.
If you have anything besides a M1009, then you get to pull the plastic gear out at the tcase and see if the teeth are coming apart. Checking the oil level in the t-case would also be a good idea.
Those M1009 owners out there with 33" tires have a speedometer that reads about 6% slow. If your reduction box is the problem, you can live with it, get another reduction box or change out the plastic gears inside the tcase to make it spot on accurate without the reduction box.
