Xterra transmission limp mode and grinding

A faulty transmission oil temperature sensor can certainly cause those issues, especially the limp mode. It's less clear why a sensor failure should directly cause grinding, however. Are you sure the scanner is correctly reporting the error? Have you tried clearing the code to see if it reappears immediately?

Good point. The scanner is a decent one, and the code came back immediately after clearing. I'm just puzzled why low fluid might be related to the sensor throwing a code. Is there some kind of feedback loop there I'm missing?

It is plausible that extremely low fluid levels could indirectly affect the sensor reading, although it is rather unlikely. Nevertheless, you may be correct in that the error cause is related to the gear oil. Given the symptoms and confirmed code, and acknowledging the limits of remote diagnosis, I would suggest consulting a qualified technician for professional assessment.

Thanks for the input. It turns out the fluid was indeed low, as suspected, though not critically so. Topped it off, cleared the code, and it runs as it should. Had the local mechanic do an inspection of the sensor anyway. 365€ later, all is well.