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My understanding is that the switch on the top of the gearbox is closed circuit when in 4th and open circuit in any other gear. The power from the OD switch (or relay - depending on how it is wired) runs through the switch on the top of the gearbox so that the power only reaches the solenoid on the OD when the gearbox is in 4th.
It may be that the switch is stuffed and permanently on but that would not explain why it stays in OD when you switch OD off. I think it is more likely that your solenoid is jammed on.
Whatever you do, make absolutely certain that you never drive in reverse with OD engaged. Reverse is certain and sudden death to overdrives when engaged. If it were me, I'd go for a drive in 4th gear and try an get it to a state where you know that the OD is definitely off, then disconnect the wiring until you sort out what the problem is. It might be necessary to take the M41 out and bench test it. A tacho is a good diagnostic when driving. There is also a port in the side of the OD that you can connect a pressure gauge to. When driving with OD off it should show about 20psi. Switch OD on and it should climb to about 500 psi as the hydraulics pump up. I have used a pressure gauge to bench test an OD. It would take a bit more setting up for a road test - piece of brake pipe running up to a gauge clamped to a front door maybe.
One easy test of the solenoid is to listen for the click as you work the switch when you are parked up in 4th gear with the engine stopped.
If you want to bench test your M41, ask me for more info. I developed a simple bit of gear for a cheap and crude but very effective test rig.
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