Glad you figured it out. I've had trouble with air pockets before too. Now I always drill a small hole in the thermostat to allow air to escape, that is if I run a stat at all. I've had so many of them fail and come close to ruining engines that I usually just remove them if I can get away with it.
As far as the gauge goes, I never trust factory equipment. If it's important enough that I know the actual temp, I buy a quality unit like the Autometer Pro Comp series. Then I test it in boiling water to verify it reads 212 degrees (compensate for altitude if need be). I have a laser temp gauge too, it's best to read the thermostat housing because the the radiator and tank can be cooler. But if water isn't flowing due to an air pocket then the head will get real hot and the thermostat housing, radiator etc may remain much cooler.