P0339 code crankshaft sensor 1999 Tahoe jerking under load

I bought 99 Tahoe with 148K, 5.7 liter.
Check engine light on, P0339 crankshaft position sensor...intermittant circuit...
I check the wires from VCM to sensor plug, they ohmed properly i believe (0.5 - 0.9 ohms).
The truck starts fine, runs perfect at idle but when driving, It will jerk, cut off, backfire, jerks like crazy. It happens when I accelerate, at all speeds in all gears, nothing in particular.

Fuel pressure is about 55psi. I changed fuel filter.
Somebody changed the crankshaft sensor so i pulled the sensor and noticed the reluctor wheel had rubbed the tip of the sensor and I believe that is not acceptable so could that be the problem after all? how do i fix this? Is there a learning procedure for these things or that isn't necessary?

I really like this truck, always wanted one of the older body styles but this thing is barely driveable and want to get it going. Any help is appreciated. The sensor being rubbed through isn't a good thing. Has anyone had the timing cover off or have replaced the chain recently? Honestly I dont have any history about the vehicle, It doesn't look that anything recent was dont by looking at the cover other than a clutch fan.
If my suspiciion is correct, will i be needing to put a new cover, chain, etc....?

there is absolutly no engine noise or leaks.

So this would be the problem causing the code and jerking? Will the ECM cause this?

thanks for any help. Haven't really seen any engine controller issues causing a problem like that. GM PCMs with the aluminum fins are pretty robust. Have you tried wiggling the harness for the crank sensor with the engine running to see if you could induce the problem? The wires for the crank sensor may have ohm checked good, but did you ohm check them to see if they were shorting to ground? Also make sure that the harness didn't somehow get close to any secondary ignition components. Are the plug wires the suppression type? I didn't test shorting to ground actually, when it comes to electrical I need a crash course because I dont know how to test to ground?
If I wiggle the harness while its running nothing happens since the problem only occurs while i'm driving it so with increased RPM's, I can rev the engine in park without a problem so being under a load is when it really happens.
What do you mean by suppression type plug wires?

thanks. i'll try anything you suggest. If you clear the code, does it come back? One other thing if the crank sensor signal is erratic, the rpm gauge will be jumping all over. If you had a high end scan tool or knew someone that had one you can watch the RPM signal to see if it is jerking around.

Most of the time a misfire under load has something to do with secondary ignition components. Have you pulled the distributor cap and inspected the rotor and underneath the cap itself? How are the plug wires? Could be having a coil breaking down problem. Those things are hard to check unless you have a ignition scope. The tach on the dash will shoot down and bounce back up, but not too high. This happens when the symptoms occur. Its as if the Rpm's go down and the engine shuts down and fires back up.
I did clear the codes with a generic scanner and the light came back on a few trips later with the same p0339, but the symptoms always existed even after I erased the codes. Maybe its worth mentioning but there was also an 02 sensor code but I can't remember what it was.

I have a relative who has a Modis but not sure if he knows how to use the scope...etc.
I've read that a re-learch precedure must be done when replacing crank sensors, is that a must? can the modis do this?

I haven't messed with the secondary ignition components quite yet, i didn't want to change all of them and not know what the problem is but if I have to then I will. I