James, yes, it has everything to do with the switch on the transmission. On all Alpines there are two locations for switches activated by the gearshift. One is for the Backup Lights and one is for the OD lockout (or "Isolator" switch). One position is on the left side of the transmission cover and one of on the right side. It depends on whether you have an early tranny or later all-synchro tranny as to which switch is on which side. I forget which side has the OD Isolator, on which tranny, but I'm sure someone here does remember. Assuming you are speaking of one switch on one side, but with 4 terminals, I must say I have not seen such with 4 terminals, but I can image such are made. If the 4 terminals are all on one side of the tranny then they are not for both OD and Back Up, but simply extra terminals for each pole of the switch. The fact that is DOES deactivate when you shift into the Reverse (DD??) position indicates that the switch you have is apparently installed on the correct side for OD, but it requires some adjustment shims to be installed to achieve correct action. See page 4 and 6 of section E.1 of the WSM145 for instruction on testing the OD Isolator and adjusting the OD Isolator switch. Most likely whoever installed that switch did not take care to make sure it was adjusted when installed.
Tom