Is the transmission fluid fine, not burnt?
Are the temps actually OK - how were they measured at 160?
Is the weather getting warmer where the Jeep is?
jtec posted a helpful troubleshooting tree, I will also share my experience with the same transmission and error code
The same error code pops up on mine, usually when it's really hot out. Never in the winter. Using an OBD meter, I can see the transmission temp spike up for 1 sec to like 150 Celsius, trigger the warning, and then immediately drop back down to its normal temp of 70C or so. Measured temps with an infrared thermometer at the transmission body, also normal at 70c. So likely a fault sensor or electrical issue.
I had the transmission completely rebuilt for another issue. The over temp error still popped up. The transmission shop then replaced the solenoid that contains the temp sensor under warranty. Same issue. They found some damage to the transmission wiring harness and replaced it. Same issue. I even added an auxiliary transmission cooler - while this dropped the overall temps, it did nothing for the occasional error.
I just live with it now. From all my research, it's probably something to do with the PCM, bad contact or overheating. I added a 12V PC fan to blow air onto the PCM which seems to have helped but the real test will be in the summer.