V-Drive Questions

I've been getting the infamous warning light & sound on my boat more frequently above the 1,200 RPM range. Not sure what it could be. I've read it is either heat related, bad sensor or low fluid level. Any ideas?? I plan on changing the fluid this week and I've read Dexron III and also read SAE 30. Not sure which is correct. It's a 2000 Ski Supreme V210 with a 350 MPI Mercruiser.

Thanks in advance

How do you troubleshoot the problem? I get the light, but i think it might be the sensor, I'm not sure...