It does sound to me like the tach regulator is toast. Mine did almost the exact same thing a few years ago.
It would read correct/nominal at idle. At highway speeds it would jump to 6K which I knew wasnt correct. After a few weeks it stopped doing this and would instead at highway speeds jump all over the place instead randomly, settle out to 3K, then bounce around again. I guess you maybe skipped that last step.
Solution was to replace the tach with one from a salvage yard. Paid $50 for a compelte cluster. Worked perfect after that!
Make sure to get one from a 96-97 4WD.
Good job thinking to check the connector on the side/base of the distributor for a good connection.