Mk3 came with electronic VSS, in 020 and 02A, and that will bolt into any car with those same transmissions. So you have the electronic or cable option either way.
THe Mk2 cluster needs a cable, of course, the only reason to swap to a VSS is if you change the cluster. The Mk2 speedometer has a VSS built into it, for cruise control and engine computer, it gives off the same signal as a Mk3 VSS so it can be used in place of it (for a VR6 or ABA ecu, for example).
Your big black plug is a gear indicator switch, nothing to do with speed (it signals for reverse, 5th gear for the upshift light, and other gears and signals for other cars).