When you shift into overdrive, your Dakota’s automatic steps down and goes into a direct connect lockup. In another gear, you see, the transmission spins up and then acts as the interpreter, if you will let me use the analogy, that takes the power from the engine and translates it to a form the driveshaft can use.
When you get to the overdrive hookup, though, the engine and transmission are locked so that for every cycle or part of a cycle the engine turns, the driveshaft turns at the same rate.
I would suggest you take a look at two areas: the solenoid or the valve body. It is possible that the solenoids that set the overdrive gearing are gone. If this is the case, then your Dakota won’t go into overdrive. There are usually two solenoid packs that work together to set proper gearing. I would suggest changing both solenoids to see if this is the problem part, as I suspect. You should find that overdrive is restored.
If the solenoids aren’t the problem, then I would have the valve body checked over for a sticking check valve. The valve body is essentially a series of galleries through which transmission fluid is directed so that the proper gearing is chosen. If a check valve doesn’t open, then the fluid doesn’t flow correctly and there’s no overdrive.
One thing you can do up front is have a diagnostic run with an OBD-II scanner tool. Your Dakota is late enough so that it should log any transmission issues to memory. I suspect you will find that the scan will back up my judgment.
If not and if you are planning on keeping the Dakota, then a rebuilt transmission is a good idea. You will find that it costs will cost you between $3,400 and $4,200, depending on the part of the country in which you are living. You may be able to save considerable money by finding a used transmission at a scrapyard. If you can find one that has been pulled from a similar Dakota, you will save about half the cost of the rebuilt.