I don't see how a bad vehicle speed sensor would further damage your car other than that safety feature being disabled during an emergency like no ABS or you loose traction on one of the wheels. You should be able to see a cable running to each of the wheel hub just behind the brake rotors or if you look under the belly of your car from the otherside of the wheel. The sensor reads either a magnetic/electrical signal from each passing of the hub tooth.
If it were just the sensor cable, then it's sorta easy to replace w/ another from a junkyard which I got for $60 as opposed to $110 at the dealer. Just need quite a bit of elbow grease b/c it in a very tight area. When I did my shocks, one of the shop guys not being careful wrapped my rear left sensor cable around it and it got sliced as soon as it got off the lift. If it's more internal like the ABS box, then I'm not sure. Look into getting a Helms shop manual from helminc.com for about $80 as a good investment for your DIY on your car.
Well, the automatic transmission does read the VSS for when shifting. Over time, it may cause irratic shifing of the transmission. If you notice, there is a VSS trouble code not only in the ECU "Check Engine light," but also in the transmission ECU "Blinking D4 light". What kind of damange can occur with the transmission is unkown to me, but I wouldn't wait too long to get it fixed.
As already mentioned, the shifting will most probably be erratic and the cruise as well. I believe that the A/T will flare and this will create undue stress on internal A/T components and thus accelerate wear. In short, this should be repaired ASAP.