I have an '89 Camaro Rs with a 305 tbi and 700r4 trans. Speedometer hasn't worked in a couple of years, I think ever since i changed the rear to a 3.73 posi. It used to give an incorrect speedo reading (because of the gear ratio change) but all of the sudden stopped working and the needle sat at 0. A friend of mine took it upon himself to "look at" the VSS. After he took it out and put it back in the speedo worked like it used to, with the incorrect reading, but now it shifts wierd. Does the VSS affect the shift timing?

No, but it will affect the operation of the torque converter clutch.

Would it be better to just disconnect the speedometer cable again?

No, you need to check the TV cable for proper adjustment thats what controls the shift points , if it's not adjusted properly the shifts will be late and eventually burn out the clutches and bands ..also if the TCC is disconnected it would cause the trans to heat up and cause issues also..

The trans is actually shifting to soon.
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Anyone know an approximate price on a new VSS?

The TV cable is what controls the shift points you will need to adjust it for proper shift points weather short or long , the VSS generator can probably still be purchaced new but a used one off of a salvage car would probably be cheeper and should restore the speedometer function The VSS has multiple parts and runs through the computer and on cars with electronic speedos has a transducer on the back of the cluster and a signal generator port at the trans where the gears are you may need to check all of the components .