I have a 89 Prelude si and have had the s3 flashing and the speedometer not working on two occasions. I've read
on a few posts this is possibly a bad speed sensor? Has anyone had this happen, and any idea where I could find the part? Honda has discontinued it.

 

with the 88-89, the problem is usually the speedo cable. you can actually remove the entire cable assembly, and pull the actual cable right out of the housing to see if it is broken or not. if it is not broken, it usually requires a hefty cleaning, then coat the whole thing in a good waterproof grease, then reassemble, and typically is good as new.
It's extremely rare for the speed sensor to go bad in a 88-89 prelude. if it does go bad, the sensor is actually part of the gauge cluster, which would require a replacement cluster. Do the speedo cable fix linked below

check out these two writeups. the process is the same for your situation:
Bouncing Speedo Needle/Surging Cruise Control
Jiggley Speedo

 

I was leaning more towards the cable itself as well. Thanks for the reply, I will give it a try.