1966 valiant ignition problem

Almost certain that the NSS is not bad and is doing its job fine. It is a simple plunger switch and very unlikely to fail. Just because the "shift indicator" shows "R" doesn't mean the tranny is in "R". It was probably actually in "N" (hence the NSS was happy there).

The shift indicator has spring detents and the tranny has its own spring detents. Disconnect the linkage and move the tranny lever by hand (or cable if 1965-) and you will feel the detents. Your job is to adjust the linkage so the two detents match. The manual details it. In my 1965, the adjustment is a wheel on the shift cable. I like to adjust it when the tranny pan is off and I can feel and see the operation below.

The NSS is on the driver's side. Should be the only electrical wires to the tranny. Some cars have a single wire and some have 3 wires. The two outer wires are for the backup lights (connect together in "R"). The center wire is the NSS and shorts to gnd in "P" or "N", completing the coil circuit in the starter relay. If yours has a single wire, the backup switch is separate, somewhere on the shifter. My 65 has a floor shifter, w/ separate backup switch in the cabin, so a 1-wire NSS.