The fact that his OD only engages when 4th gear is selected means the 4th gear switch is operating properly. Thus, no danger of the OD being engaged in reverse (or any other gear but 4th), even with a malfunctioning switch.
The relay was introduced for a few reasons. One, it takes the electrical current load of the OD solenoid off the little switch. Second, the OD relay toggles "off" whenever you either shift out of 4th, hit the little gear knob button, or shut the ignition off. OD can not be engaged again until the trans is back in 4th at a decent speed, and you hit the button. This prevents OD from being automatically and instantly engaged as you select 4th gear, if you left the switch "on", which is what would happen with the older (no relay) setup.
Both systems employed the 4th gear switch to prevent OD operation in any other gear.
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Bob: Son's XC70, my 83 240, 89 745 (V8) and S90. Also '77 MGB and some old motorcycles
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